The London Stock Exchange Group (LSEG) has agreed to buy financial-information provider Refinitiv for $27bn, in a move that will transform the 321-year-old City’s most iconic institution into a rival to Bloomberg’s data business.
The deal comes ten months after private equity group Blackstone acquired a majority stake in London-based Refinitiv from Thomson Reuters Corp, valuing the business at the time at $20 billion including debt.
Under the deal which will increase LSEG’s presence in US and allow expansion into Asia, Refinitiv shareholders will ultimately hold around a 37% stake in the combined group -but less than 30% of the total voting rights - with Thomson Reuters holding a 15% stake.
A tie-up between the two companies which had combined revenue of £6 billion ($7.3 billion) in 2018, would create the world's largest financial markets infrastructure provider.
LSEG shares jumped 6% after the deal was announced. The announcement came as LSE published half-year earnings on August 1, reporting an 8% rise in total income.
LSEG said it expects the deal to complete in the second half 2020 and will pay Refinitiv a break fee of 198.3 million pounds if the merger is blocked by regulators who are likely to scrutinise the takeover and its potential impact on market data costs.
EU antitrust regulators blocked LSEG’s attempt to merge with rival Deutsche Boerse in March 2017. It was the exchanges’ fifth attempt to combine and the deal would have created a market operator with enormous sway across Europe.
Commenting on the Transaction, David Schwimmer (pictured), CEO, LSEG, said: "With the acquisition of Refinitiv, we will transform our position as a leading global Financial Markets Infrastructure group. Refinitiv brings highly complementary capabilities in data and capital markets, as well as deep customer relationships across a truly global business.
Schwimmer, a former Goldman Sachs banker of 20 years, who replaced former LSEG CEO Xavier Rolet in August 2018, has repeatedly said that acquisitions form part of his plans to grow the exchange, raising expectations of big deals.
From his end, David Craig, CEO, Refinitiv, said: "LSEG's business is highly complementary with Refinitiv's leading global data platform, transaction and distribution network. Our aim is to capture the opportunity of data which we believe is driving unprecedented change in the global financial community.
Refinitiv, the former financial and risk business of Thomson Reuters, provides financial markets data and infrastructure to more than 40,000 clients in over 190 countries, with three-fifths of its sales coming from North America and Asia.
Refinitiv offers products including the Eikon terminals, foreign exchange aggregator FXall platform and the execution management system REDI to traders and investment professionals who also use LSE’s exchanges.
(LSEG SHARE PRICE JULY-AUG 2019 Graph Source: LSEG)
The deal also comes amid Brexit uncertainty. UK's Prime Minister Boris Johnson has vowed to take Britain out of the European Union by October 31 with or without a deal.
LSEG has already reorganised some of its EU-exposed businesses so that it can carry on serving clients based in the EU in the event of a hard Brexit. It opened an Amsterdam hub for its Turquoise trading platform and shifted European government bond trading to the Milan arm of its MTS platform.
“Will investors like LSE's acquisition of Refinitiv—or do they just like leverage?” wrote the Wall Street Journal.
“The $27bn deal is a gleam of light in the Brexit gloom” wrote The Economist.
If the deal is approved from shareholders, antitrust authorities and regulators, it will put the London Stock Exchange up against big competitors, including Intercontinental Exchange, which owns the New York Stock Exchange, and Nasdaq which already have global presences and robust market data offerings.
EU regulators have approved LSEG's $27bn purchase of Refinitiv, creating a stronger competitor to financial data leader Bloomberg LP.