LSE's US$27b Refinitiv deal creates trading powerhouse

London

LONDON Stock Exchange Group agreed to snap up Refinitiv in a US$27 billion blockbuster deal, betting on a future dominated by data that will extend its reach beyond Europe.

Shares in LSE rose as much as 8 per cent after the exchange operator unveiled details of the transaction for the data and trading provider, which chief executive officer David Schwimmer said fulfilled his ambitions to expand the group further into global analytics and the buy-side industry.

"It will create a business with global scale and geographic diversification in key markets including North America and fast growing emerging markets and Asia," said Mr Schwimmer on a media call.

The transaction is expected to complete in the second half of 2020, according to a statement on Thursday.

The exchange confirmed it will issue shares, while a US$13.5 billion bridge loan will increase the firm's leverage above its target in the short term. Refinitiv's existing shareholders, including Blackstone Group, will get a stake of approximately 37 per cent in the enlarged firm.

The deal will need regulatory approval in multiple countries, Mr Schwimmer said, adding there were "no plans or intentions around divestiture". The LSE said in a statement it might be required to make divestments, which could be material. Refinitiv will get a break fee of £198.3 million (S$331 million) if clearances are not obtained.

The purchase marks the first major move by Mr Schwimmer, who joined the 300-year-old bourse from Goldman Sachs Group last August and has been riding a 30 per cent surge in the stock price from his first day through July 26, when news of the discussions broke.

Refinitiv serves over 40,000 institutions in 190 countries including buy and sell-side firms, governments and corporations. Its trading venues include a stake in the recently listed Tradeweb and the FXAll and Matching platforms, with average daily trading volume of over US$400 billion in currencies and US$500 billion in fixed income. Mr Schwimmer said he expects Tradeweb to keep its listing following the deal.

Refinitiv's products also include the Eikon terminal and the trading-execution system Redi. Bloomberg, the parent of Bloomberg News, competes with Refinitiv to provide financial news, data and information.

LSE said the deal is expected to produce 350 million pounds in annual savings within five years. Mr Schwimmer said there were overlaps in technology, property and corporate functions, with some job cuts possible, although he declined to give more detail. Refinitiv has 19,000 staff while LSE has about 4,500.

Blackstone, Canada Pension Plan Investment Board and GIC, Singapore's sovereign wealth fund, acquired 55 per cent of Refinitiv - as the former financial and risk unit of Thomson Reuters was renamed - in a transaction last year that valued the business at US$20 billion.

These shareholders will be entitled to nominate three board members, as long as they hold at least 25 per cent of the enlarged firm. They are committed to holding their stock for at least two years. BLOOMBERG