Stock Exchange Group plc's planned purchase of Refinitiv in a US$27 billion deal is the latest sign that exchange operators are focusing more on data products to increase revenue, while also trying to expand their global reach.
The deal would come less than a year after buyout firm Blackstone Group Inc bought a majority stake in Refinitiv from Thomson Reuters Corp, valuing the company at the time at $20 billion including debt. Its majority owners are Thomson Reuters and United States private equity firm Blackstone. Adding Refinitiv to the roster gives the LSE firmer data footing while diversifying its revenue streams.
"It just makes them more competitive and more appealing as a partner for customers because it brings together a lot more than what LSE had before", said Spencer Mindlin, an Aite Group analyst who focuses on capital markets trading technology.
At London Stock Exchange, former chief executive Xavier Rolet began to diversify revenue after taking the helm in 2009.Today, information services account for almost 40% of the group's 2.14 billion pounds ($2.65 billion) in annual revenues, according to its 2018 annual report.
"The parties anticipate that the transaction would result in the Refinitiv Shareholders holding an approximately 37 percent stake in the enlarged group and less than 30 percent of the total voting rights of LSEG", the LSE elaborated in a statement. Refinitiv's bonds, issued when Blackstone bought Thomson Reuters' Financial and Risk business to form Refinitiv, also rallied across the curve.
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3 sources accustomed to the matter instructed Reuters that the personal fairness fund intends to press forward with the deal having rigorously weighed regulatory hurdles and the danger that LSE shares may fall sharply if Britain leaves the European Union and not using a deal in October.
A merger would significantly expand the LSE's information services business, which the bourse operator has been building as a more stable source of cash flow than its trading and clearing businesses, putting pressure on competitors including Intercontinental Exchange Inc ICE.N and Deutsche Boerse AG DB1Gn.DE .
Some shareholders expressed concerns about LSE's ability to fully integrate the new companies and maximise potential synergies and cost-savings.
The EU is expected to scrutinize if the deal will affect the price of financial data, one source said.
LSE has said negotiations for the deal - the largest ever attempted by an exchange operator per Refinitiv data - are at an advanced stage.