Citi to Sell Fixed-Income Index Unit to LSE for $685 Million

(Bloomberg) -- Citigroup Inc. agreed to sell its fixed-income analytics and index business to London Stock Exchange Group Plc for $685 million in cash following a strategic review of the unit.

The transaction includes Citigroup’s fixed-income analytics platform, The Yield Book, and indexes including the World Government Bond Index, the New York-based bank said in a statement Tuesday. The business generated $107 million of revenue in 2016, LSE said in a separate statement.

The deal, which is expected to close in the second half of the year, will increase the value of assets following indexes owned by LSE’s FTSE Russell subsidiary to more than $15 trillion. Investors controlling some $12.5 trillion currently use FTSE Russell indexes.

“It’s the best fixed-income benchmarks or analytics business in the market that’s still available,” said FTSE Russell Chief Executive Officer Mark Makepeace. “After this business, there’s a bit of a gap.”

Companies that compile indexes have been consolidating over the last few years. Bloomberg LP, the parent of this news organization, bought Barclays Plc’s analytics and index business for 615 million pounds ($790 million) in August last year. LSE changed the name of its index business to FTSE Russell after it acquired Frank Russell Co. for $2.7 billion in 2014, while Deutsche Boerse AG bought out the minority investor in Stoxx AG for 650 million Swiss francs ($665 million) in 2015.

The Yield Book traces its roots to books about bond data that Salomon Brothers began publishing in the 1960s. It offers a range of analytical tools for investors and traders in corporate, government and mortgage bonds, as well as derivatives and other kinds of securities, according to its website. Salomon Brothers, the Wall Street firm that essentially created the modern fixed-income market, started Yield Book in 1989 as a software tool for helping customers calculate bond yields.

“This partnership will help accelerate the growth of our business,” Richard Burns, global head of The Yield Book and Citi Fixed Income Indices, said in the statement. “As part of London Stock Exchange Group, our clients will benefit from continued investment and strengthening of our analytics platform, together with a broader range of indexing capabilities.”

Citigroup has been exploring a sale of The Yield Book since at least July 2016, people said at the time. The fourth-largest U.S. bank by assets has sold several units across its sprawling consumer and investment-bank operations over the past two years to shore up capital, lower expenses and increase returns.

LSE bought the indexes at an auction. Citigroup has not revealed the other bidders for the business.

The operator of the London Stock Exchange expects to generate $30 million of revenue synergies over the first three years, as well as $18 million of cost savings, the London-based firm said in its statement. The Yield Book serves about 350 institutions globally, while the fixed-income indexes have about 300 clients.

To contact the reporters on this story: Christian Baumgaertel in Munich at cbaumgaertel@bloomberg.net, Will Hadfield in London at whadfield@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Michael J. Moore, Jon Menon