LSE Soars on Bet $27 Billion Refinitiv Bid Will Boost Bourse
London Stock Exchange Group Plc shares soared to a record as investors bet the planned $27 billion takeover of Refinitiv will transform the bourse into a global force in data and trading platforms.
A takeover of the former financial and risk unit of Thomson Reuters Corp. would pump up LSE’s fastest-growing segment and is the most aggressive move yet by LSE Chief Executive Officer David Schwimmer, who joined the more than 300-year-old exchange from Goldman Sachs Group Inc. in 2018. The stock rose as much as 15% in morning trading, adding to a 40% gain on Schwimmer’s watch.
LSE’s information-services unit, driven by the FTSE Russell Indexes business, has led revenue growth in recent years. LSE would issue shares as part of the transaction and Refinitiv holders may receive a stake of about 37% in the combined group, LSE said Saturday in a statement in London.
“The deal would be strategically sensible and transform the LSE into a truly global infrastructure player,” Gurjit Kambo, an analyst at JPMorgan Chase & Co., said in a note to clients.
LSE shares rose to 6,518 pence in London trading at 9:14 a.m., the highest price on record. LSE’s 500 million euros ($556 million) of 1.75% bonds due 2027 dropped the most ever, losing around 2 euro cents to 108 cents, data compiled by Bloomberg show.
The exchange earlier tried to add heft by combining with Deutsche Boerse, a deal that would have put LSE in the same league as CME Group Inc. and Intercontinental Exchange Inc. That combination was blocked by regulators, and Schwimmer ruled out big exchange mergers after taking the job. More recently, LSE benefited from a program to link up with Chinese markets and a move by European regulators in February to allow euro clearing on both sides of the English Channel under any Brexit scenario.
“It’s a big move,” said David Cumming, chief investment officer for equities at Aviva Investors, which is among LSE’s biggest shareholders and spoke on the BBC. “Gearing post the deal is going to be pretty high, so if things go wrong it will have an impact. It’s a logical deal, so I think the market will see it as sensible, but maybe some degree of risk is attached.”
The main benefits to LSE of a Refinitiv deal would be expansion of data and distribution capabilities, diversification of the trading business into currency and fixed income, and extension of the exchange’s global footprint, particularly in the Americas, said Kambo of JPMorgan Chase.
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A formal agreement could be announced Aug. 1, when LSE publishes half-year earnings, people familiar with the talks said earlier. Analysts expect financial details to be disclosed by then.
“There are a number of very attractive assets within Refinitiv that make sense strategically for LSE in an increasingly scarce environment for acquisition targets,” said Kyle Voigt, an analyst with Keefe, Bruyette & Woods in New York, also highlighting asset classes such as currency and fixed-income trading. He said Refinitiv would add about about 785 million pounds ($968 million) of trading revenues, including those from the Tradeweb and FXall platforms.
Refinitiv’s products also include the Eikon terminal and the trading-execution system Redi. Bloomberg LP, the parent of Bloomberg News, competes with Refinitiv to provide financial news, data and information.
A regulatory review of any deal could take as long as a year, Keefe, Bruyette & Woods analysts also said.
Blackstone Group Inc., Canada Pension Plan Investment Board and GIC, Singapore’s sovereign wealth fund, acquired 55% of Refinitiv in a transaction last year that valued the business at $20 billion.
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