Swiss stock exchange protections complicate SGS-Veritas deal

By Oliver Hirt and Ariane Luthi

ZURICH (Reuters) - Swiss firm SGS's potential $30 billion merger with French rival Bureau Veritas may become snaggled by tit-for-tat measures imposed years ago during a Swiss-EU stock market row.

SGS last week said it was in talks to combine with French rival Bureau Veritas in what could be an all-stock transaction, according to a person familiar with the matter, meaning that SGS shares would trade in Paris.

However, such listings of Swiss shares in the EU are forbidden by protective measures Switzerland issued in 2019 when the bloc withdrew its recognition of equivalence for the Swiss exchange amid a row over bilateral trade talks at the time.

"In exceptional cases, the protective measures can indeed lead to hurdles for companies listed in Switzerland," a spokesperson for the SIX Swiss stock exchange told Reuters.

"This is the case, for example, if foreign law requires a listing in the EU in the course of an international takeover."

SGS declined to comment.

Authorities appear to have noted the potential headache and are taking steps to withdraw the measures.

The Swiss finance ministry declined to comment on the potential tie-up between SGS and Bureau Veritas. But it acknowledged such transactions could face problems. 

"It can't be ruled out that the existing stock exchange protection measure may make it more difficult for Swiss companies to take over European companies if takeovers result in double listings of Swiss shares," a ministry spokesperson said.

The ministry has recently advocated lifting the protective measures and in January got the support of several parliamentary committees to do so. One of them noted that Switzerland and the EU in December finally reached a deal to overhaul trade ties.

Switzerland's governing Federal Council has yet to decide on whether to repeal the measures.

The ministry said that there are no longer significant grounds for them given EU financial rule changes in 2024.

But there is still resistance to ending the measures.

Swiss Banking, a lobby group for the financial sector, said the protections should not be lifted until the EU recognised Swiss stock exchange regulations as equivalent again.

SIX Swiss Exchange signalled openness to changes that could help transactions like an SGS takeover of Bureau Veritas. 

"While we remain critical of the lifting of the protective measures, we would be in favour of allowing dual listing in the EU in exceptional cases if objective reasons justify this," the SIX spokesperson said.

(Reporting by Oliver Hirt and Ariane Luthi; Editing by Dave Graham and Sharon Singleton)