March 17, 2020 / 7:08 PM / 22 days ago

UPDATE 1-Spain's move to stop foreign companies swooping spooks BME investors

* Shares in BME close 7% down, while Ibex-35 rises 6.4%

* BME doesn’t expect restriction to impact takeover from Swiss SIX

* Spanish Goverment source says expects SIX deal to go ahead (Adds details)

By Jesús Aguado and Belén Carreño

MADRID, March 17 (Reuters) - Shares in Spanish stock-market operator BME, which is the target of a takeover by Swiss rival SIX, fell as much as 9.6% on Tuesday after Spain unveiled a plan to block foreign acquisitions of strategic companies.

The sell-off took place even though it was not clear whether the new restrictions would affect SIX’s pursuit of BME and a government source, speaking on condition of anonymity, told Reuters after the market close the government expected the deal to go ahead.

“We have changed the rules on foreign investment to prevent companies from non-EU countries from taking control of strategic Spanish companies,” Prime Minister Pedro Sanchez said on Tuesday, as he announced a 200 billion euro ($219.44 billion) package to help companies and workers weather the impact of the coronavirus crisis.

Sanchez said the restriction’s aim was to prevent prospective buyers from taking advantage of market volatility and a widespread slump in equity valuations to snap up companies cheaply.

The news helped to reassure the wider market, but not investors in BME.

Spain’s Ibex 35 index rose by 6.41%, while BME shares closed down 7.082% at 28.340 euros, recovering slightly from session lows.

A Spanish government source said BME would not be affected by the new rules as the companies considered strategic were in the telecomunications, utilities and power sectors.

The source also said that Switzerland would not be one of the countries affected by the restrictions and it expected the government to approve BME’s takeover by SIX soon.

SIX’s bid of 34 euros a share for BME, which it submitted in November, implies an equity value of 2.843 billion euros, a premium of 34% over the Spanish bourse’s market capitalisation of roughly 2 billion euros prior to the offer.

A spokesman for BME, declining to be named, said he did not believe the bill would affect BME or SIX’s offer. BME was already protected under Spanish law as it a significant part of the country’s market infrastructure, he said.

SIX declined to comment on the share price move.

By Feb. 11, SIX had submitted all the necessary paperwork to authorities, giving the Spanish regulator 30 working days to issue a report, while the Spanish government had 60 working days to authorise the deal, a source with knowledge of the matter said.

The government was expected to set some conditions on the Swiss deal that would require SIX to revise its offer.

Earlier on Tuesday, SIX had said it expected to get Spanish regulatory clearance by the middle of the year for its friendly offer.

$1 = 0.9114 euros Reporting By Jesús Aguado; additional reporting by Emma Pinedo; Editing by Nathan Allen and Barbara Lewis

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