London Stock Exchange Group (LSEG) said on Friday it has entered exclusive talks to sell Borsa Italiana — owner of the Milan stock exchange — to Euronext.

Euronext is bidding with Italian state-backed lender Cassa Depositi e Prestiti SpA (CDP) and Italy’s biggest bank Intesa Sanpaolo SpA — and those two institutions would take stakes in Euronext if a deal emerges.

Borsa Italiana also owns MTS, the venue where most of Italy’s sovereign debt securities are traded, as well as a clearing and a settlement house.

Euronext, which owns the main stock exchanges of Paris, Amsterdam, Dublin, Oslo, Lisbon and Brussels, has seen off rival approaches from Deutsche Boerse and Switzerland’s Six as it bids to add another bourse to its pan-European network.

Euronext said the deal would be financed through existing cash, new debt, a rights issue to existing shareholders and new shares issued to CDP and Intesa.

Euronext also said it planned to keep governance of Borsa Italiana in Italy and make an Italian its chairman.

The sale of the Milan stock exchange is politically sensitive in Italy due to concerns about who takes control of its bond platform, which handles the trading of Italy’s €2.6 trillion of government debt securities.

Analysts estimate the Italian assets of LSEG are worth €3.5bn to €4bn.

LSEG is selling Borsa as part of the regulatory solution for its $27 billion purchase of data provider Refinitiv, which is 45% owned by Thomson Reuters.

“Further to the announcement on 31 July 2020 regarding MTS and Borsa Italiana group, London Stock Exchange Group plc received and reviewed a number of competitive proposals from several parties for each of MTS and the Borsa Italiana group as a whole,” said LSEG.

“LSEG confirms it has now entered into exclusive discussions with Euronext N.V. in relation to the sale of the Borsa Italiana group. 

“There can be no certainty that a transaction will result from these discussions and any potential sale will be dependent upon the outcome of the European Commission’s review of the Refinitiv transaction and that transaction closing in accordance with its terms.”

Goldman Sachs and Morgan Stanley is advising LSEG on the sale, while Euronext is represented by JP Morgan and Mediobanca.