LSEG to Acquire Refinitiv for $27 Billion Ahead of Brexit

billionTogether, LSEG and Refinitiv generated combined annual revenue of over £6 billion in 2018. The combined business would have been the largest listed global financial markets infrastructure provider by revenue last year. LSEG expects revenue synergies to surpass £225 million by the end of year five following the transaction.

London Stock Exchange Group has reached an agreement with Refinitiv’s shareholders, including Blackstone’s consortium and Thomson Reuters, to acquire the business in an all-share transaction for a total value of approximately US$27 billion.

Neill Vanlint, Head of Global Sales at GoldenSource, said: “One could speculate that the steady revenue stream the LSE will receive from acquiring Refinitiv could provide a nice Brexit buffer from any negative no-deal fallout. But regardless of the possible
drivers behind the acquisition, there is no doubt that the LSE now has far greater data firepower at its disposal. Once the dust settles on the deal, the big challenge will be coming up with a common model for the different data sets across both the exchange and the pure data business. Only with a standardised approach across the business can the LSE avoid fragmented business lines and ensure efficient distribution of data.”

The Transaction will result in the Refinitiv Shareholders ultimately holding an approximate 37 per cent economic interest in LSEG and less than 30 per cent of the total voting rights of LSEG.

LSEG and Refinitiv are found to be two highly complementary businesses which can become a leading global financial markets infrastructure provider with a data and analytics business, significant capital markets capabilities across multiple asset classes, and a broad post-trade offering.

Benefits for LSEG’s customers will include extending its trading capabilities across asset classes; expanding its data content, management and distribution capabilities; increasing its global
footprint and range of customer offerings; and enabling LSEG, Refinitiv and their customers to benefit from future data and technology-enabled innovation and growth opportunities.

The combined business targets a revenue compound annual growth rate of 5 to 7 per cent over the first three years following completion of the transaction. Recurring revenue should increase from approximately 40 per cent for LSEG standalone to around 70 per cent for the combined
business. LSEG will maintain its progressive dividend per share policy to its target range of 1.0-2.0x in the 24 to 30 months following the transaction.

The new business will be chaired by Don Robert, LSEG’s Chairman, and led by David Schwimmer as Chief Executive Officer, with David Warren as Chief Financial Officer. David Craig will join LSEG’s board and remain Refinitiv’s Chief Executive Officer.

Refinitiv Holdings and BCP York Holdings, a vehicle owned by the Blackstone Consortium, will hold an economic interest in LSEG equal to approximately 37 per cent and less than 30 per cent of the total voting rights of LSEG, following the deal.

The deal, classified as a Reverse Takeover, must first be approved by LSEG shareholders and the financial watchdogs in the UK, France, Italy, and the United States.

Don Robert, Chairman, LSEG, said: “This transaction is a defining moment for LSEG in terms of its
strategic importance. It will create substantial value for our shareholders and important benefits for our customers, employees and other stakeholders. The Board and I look forward to welcoming
Blackstone and Thomson Reuters as supportive, long-term shareholders as we work together to realise the compelling benefits of this transaction.”

David Schwimmer, CEO, LSEG, commented: “With the acquisition of Refinitiv, we will transform our position as a leading global Financial Markets Infrastructure group. Refinitiv brings highly complementary capabilities in data and capital markets, as well as deep customer relationships across a truly global business. We share a commitment to open access and partnering with our
customers to deliver innovative solutions across the financial markets value chain. Our shareholders and customers will benefit from attractive top-line growth prospects, substantial cost and revenue synergies, as well as ongoing efficiency initiatives, and this transaction will ensure we are well-positioned for future growth in an evolving landscape.”

Martin Brand, Senior Managing Director at Blackstone, said: “Refinitiv has been an outstanding performer for Blackstone and our partners Thomson Reuters, CPPIB, and GIC. We believe the combination announced today creates a strongly positioned leader in financial markets infrastructure, and we are excited about the continued prospects of Blackstone’s investment as a long-term partner of LSEG.”

David Craig, CEO of Refinitiv, said:

“LSEG’s business is highly complementary to Refinitiv’s leading global data platform, transaction, and distribution network. Our aim is to capture the opportunity of data which we believe is driving unprecedented change in the global financial community. The combined business will allow us to better serve customers across all regions. Our two companies both have strong heritages, a shared approach to open access and partnership, and we are excited to work with the LSEG team to create a leading financial markets infrastructure group and to continue to invest in our business.”