London Stock Exchange in talks to buy Refinitiv for $27bn
Purchase of financial data analytics provider could help soften the blow for LSE from a bout of market volatility that is expected should Britain leave the EU with no deal
The London Stock Exchange Group on Friday said it was in discussions to acquire financial-data analytics provider Refinitiv for $27 billion (Dh99.15bn), including debt.
The deal would come less than a year after buyout company Blackstone acquired a majority stake in Refinitiv from Thomson Reuters, valuing the company at the time at $20bn including debt.
The group said it would pay for the deal with newly issued LSE shares as currency, turning Refinitiv's existing investors into LSE shareholders who would own about 37 per cent of the combined company and hold less than 30 per cent of the voting rights.
Thomson Reuters, an information and mass media company that is the parent of Reuters News, holds a 45 per cent stake in Refinitiv. It confirmed the negotiations in a statement and said it would own a 15 per cent stake in LSE if the deal is completed.
Based on the valuation the deal would assign to Refinitiv, Blackstone will have about doubled the value of its original investment in the company, according to a source.
Refinitiv had $12.2bn in debt as of the end of December as a result of its leveraged buyout by Blackstone, which LSE would assume under the proposed deal.
LSE and Thomson Reuters both cautioned there is no certainty that discussions between the parties will progress or that a transaction will be forthcoming. that If the negotiations conclude successfully, a deal could be agreed next week.
Refinitiv did not immediately respond to a request for comment, while Blackstone declined to comment.
A merger would significantly expand LSE's information-services business, which the bourse operator has been building as a more stable source of cash flow than its primary transaction-reliant businesses.
"The global exchanges are focusing more and more on data and technology as revenue drivers, and less on the actual matching of buys and sells," said Kevin McPartland, head of market structure and technology research at Greenwich Associates.
LSE operates equity and derivatives markets that include the London Stock Exchange, Borsa Italiana, MTS and Turquoise. It is also the majority owner of LCH, which dominates euro swaps clearing. Its information-services business includes financial indexing, benchmarking and analytics services.
The company has a market value of about £19.3bn (Dh87.67bn) and net debt of about £1bn.
LSE chief executive David Schwimmer is a former Goldman Sachs banker of 20 years who has raised expectations of big deals.
The LSE has failed several times to merge with rival Deutsche Boerse. Mr Schwimmer was appointed chief executive last August after the LSE's most recent attempt to do a deal with Deutsche Boerse failed.
Buying Refinitiv could help soften the blow for LSE from a bout of market volatility that is expected should Britain leave the European Union by an October 31 deadline without an exit deal.
Mr Schwimmer said last month that LSE was "very prepared" for Brexit. The exchange has had to open an EU base in Amsterdam for Turquoise, its pan-European share-trading platform based in London.
Based out of London, Refinitiv provides financial markets data and infrastructure to more than 40,000 clients in over 190 countries, according to its website.
It caters to traders and investment professionals who also use LSE's exchanges. It is the biggest news client of Reuters News under a 30-year contract signed last year.
Thomson Reuters said on Friday that this contract will continue if Refinitiv's ownership changes.
Under Blackstone's majority ownership, Refinitiv has been shedding non-core assets. In April, it launched an initial public offering of Tradeweb Markets, an electronic trading platform for bonds and derivative instruments.
It has also been in talks with Deutsche Boerse about selling its foreign-exchange electronic-trading platform FXall.
Deutsche Boerse said on Saturday it no longer expected to reach a deal to buy FXall.
Private equity companies such as Blackstone aim to buy businesses so they can subsequently sell them at a profit, typically between three and five years later.
A deal with LSE for Refinitiv so soon after the carve-out from Thomson Reuters could prove to be a quick, profitable flip for Blackstone, which last week said its assets reached a record $545bn.
Blackstone's consortium that holds a 55 per cent stake in Refinitiv includes Canada Pension Plan Investment Board and Singaporean sovereign wealth fund GIC Special Investments.
Updated: July 28, 2019 02:18 PM