London Stock Exchange
Group PLC said early Saturday that it is in advanced calls to buy financial information and terminal operations Refinitiv Holdings Ltd. from a
consortium for nearly $ 15 billion, in one of the biggest games yet on data as a new source of growth for global stock exchange operators.
Stock market operators are facing increasing pressure on fees they generate from buying and selling shares in the midst of new competition and computerized trading. This has historically pushed exchange companies to buy up competitors to increase revenue and cut costs. But the EU decision in 2017 to block LSE's $ 30 billion merger plan with Germany
The acquisition of Refinitiv is intended to help LSE meet this challenge by further expanding its business as a data provider to investors and companies. Last year, the LSE Information Services business increased its revenue by 9% to £ 841 million ($ 1.04 billion) from the previous year, benefiting from strong growth in subscription renewal rates and data sales for its exchange-traded fund products. This growth level was more than twice the LSE's more traditional capital market activity.
Refinitiv, who is already a provider of fixed rate data to LSE's indexing business, would allow the UK-based exchange operator access to its range of data and analytical tools such as Eikon Financial Data Terminal and other products used by more than 40,000 customers, including brokerage firms, institutional investors, authorities and companies. Refinitive also drives the Tradeweb, FXAll and Matching platforms, which, on average, handle a daily trading volume of over $ 400 billion in currency and $ 500 billion in interest rates.
LSE negotiates to acquire Refinitiv from Blackstone, which together with its partners Canada Pension Plan Investment Board and Singapore's GIC Pte owns approximately 55% of the financial data company, and
, an owner of a 45% stake in the business. The deal would represent a quick turnaround for Blackstone, which agreed to gain control of the business less than two years ago in a deal that valued the new firm at $ 20 billion, including debt.
LSE, with a market value of approx. $ 24.5 billion, Saturday said it expects to refinitiv $ 27 billion, including debt, if the acquisition continues. Excluding the data provider's debt of $ 12.2 billion at the end of December, LSE would pay $ 14.8 billion for the business.
The influence of LSE on the deal is "high, but acceptable," Exane BNP Paribas said in a research note.
The stock exchange operator warned that the calls could still collapse. But if an agreement is reached, the agreement will create a company with a total annual turnover of over £ 6 billion, more than tripled the revenue generated by the exchange operator last year. The LSE also said the deal would provide annual cost savings of over £ 350 million that would be achieved over the five years following the completion of the agreement.
Still, the acquisition would represent a risky effort for LSE's newly appointed CEO, David Schwimmer,
Goldman Sachs Group
banker who has been in the top job for a short year. The size alone would dwarf some of the recent data-related transactions in the exchange area, for example
Acquired $ 220 million earlier this year by the Swedish technology technology provider Cinnober. The agreement will also stand out among some of the sector's major transactions, including
$ 5.2 billion bid for Interactive Data Corp. in 2015 and LSE's purchase of $ 2.7 billion in 2014 by index service provider Frank Russell Co.
By pursuing Refinitive, the LSE management will likely face a month-long regulatory review of the transaction's complex integration process as it seeks to achieve the agreement's revenue and cost-saving benefits. Moreover, if the benefits of the deal fall below expectations, it may prove to be dilutive to the shareholders, as LSE said it would use shares to fund the acquisition.
LSE's share price has risen by about 42% since mid-December, making it easier for the company to consider Refinitive's stock trading. The inherent risk of the agreement can still motivate shareholder resistance if the bet jeopardizes the gain in the share price.
In an agreement with Refinitiv, LSE indicated that it would own approximately 63% of the extended company, which will still be based in London. It is the key to Britain's support for the deal since London is struggling to hold on to its role as a financial center once the country has separated itself from the EU already in October.
Refinitiv's shareholders would own approximately 37% of the extended LSE and hold less than 30% of the total voting rights.
Write to Ben Dummett at email@example.com
Copyright © 2019 Dow Jones & Company, Inc. All rights reserved. Dc2bbcbcbcbbbbbbbcbcbbcbcbbb08