London Stock Exchange has agreed to buy financial information business Refinitiv in a $27 billion deal, it said on Thursday, in a move to transform the British company into a market data and analytics giant.
The Refinitiv deal will turn LSE into a major distributor as well as creator of financial market data, positioning it as a competitor to Bloomberg.
“This transaction is a defining moment for LSE in terms of its strategic importance,” the exchange’s chairman Don Robert said in a statement.
The deal comes ten months after a Blackstone-led consortium completed a leveraged buyout of Refinitiv from Thomson Reuters and marks a rapid turnaround for the U.S. private equity group which is set to double the value of its investment, a person familiar with the deal said.
As part of the deal, which was initially announced last week, Refinitiv shareholders will ultimately hold around a 37% stake in LSE but less than 30% of the total voting rights.
Confirmation of the agreement on a deal came as LSE reported an 8% rise in first-half total income to 1.1 billion pounds ($1.33 billion).
The company’s shares opened up 3.6%.
LSE said Robert will continue to chair the enlarged company and LSE chief executive David Schwimmer will remain in post, while Refinitiv chief executive David Craig will join LSE’s executive committee and continue to run that business.
The deal will help LSE expand its trading business beyond shares and derivatives into currencies by taking on Refinitiv’s FXALL and matching platforms.
“Increasingly our customers want to trade across different regions and currencies,” Schwimmer said on a call with journalists on Thursday.
But the deal is set to be subject to lengthy antitrust reviews in both Europe and the United States, four sources told Reuters before the deal was announced.
In 2017 EU competition regulators blocked LSE’s attempt to merge with rival Deutsche Boerse, the exchanges’ fifth attempt to combine.
LSE executives said they were confident this deal would make it past the regulators.
“We have two very complementary businesses, they are more complementary than they are overlapping,” Schwimmer said.
LSE Chief Financial Officer David Warren said the areas where there were overlaps that could yield cost savings include property, technology and corporate services. Schwimmer said it was too early to comment on possible job losses.
LSE stressed in its statement that it would retain its commitment to “open access”, an attempt to quash concerns that access to its data could be limited after the Refinitiv deal.
The deal comes at a time of uncertainty over Britain’s exit from the European Union and Blackstone and Thomson Reuters run the risk that the LSE share price could fall if Britain leaves the EU without a deal.
New Prime Minister Boris Johnson has vowed to take Britain out of the bloc by October 31 with or without a deal, the prospect of which sent the British pound to is lowest level in more than two years this week.
Operationally, LSE has reorganized some of its EU-exposed businesses, opening an Amsterdam hub for its Pan-European stock platform Turquoise, and shifted European government bond trading to the Milan arm of its MTS platform.
NEWS DEAL REMAINS
Blackstone’s consortium, which includes Canada Pension Plan Investment Board and Singaporean sovereign wealth fund GIC Special Investments Pte Ltd, holds a 55% stake in Refinitiv.
Thomson Reuters, which owns 45% of Refinitiv and is the parent company of Reuters, will hold 15% of LSE, the Canadian company said in a separate statement.
The company added that the agreement signed at the time Refinitiv was sold to the Blackstone-consortium for Reuters to supply news to Refinitiv for 30 years would remain in place.
Refinitiv will be entitled to nominate three non-executive board members for as long as they hold at least 25% of LSE.
One nominee will be a representative of Thomson Reuters, and the other two nominees will be representatives of Blackstone.
LSE said it would ask shareholders to vote on the deal in the fourth quarter of 2019.