• Saturday, April 20, 2024
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London Stock Exchange lays $27bn bet that data are the future

London Stock Exchange lays $27bn bet that data are the future

Just over 18 months ago, London Stock Exchange Group faced one of the most fraught moments in its long history. Brussels had quashed its high-profile merger with Deutsche Börse, the exit of its longstanding chief executive Xavier Rolet had triggered a bust-up with one of the group’s largest shareholders and Brexit threatened London’s role in global finance.

Now the exchange, more than 300 years old, is trying to get back on the front foot with a plan for its most ambitious acquisition, one that will shape the direction of the group for years to come. It is the most striking demonstration yet of the charge among exchange operators into the business of supplying the data that is at the heart of markets.

The LSE on Friday confirmed a Financial Times report that it was in talks to buy data and trading
venue group Refinitiv for $27bn including debt, from a consortium led by private equity group Blackstone.

If an agreement is reached for a company best-known for its Eikon desktop terminals, it would transform the LSE into a provider of financial market infrastructure and data with the scale to take on US exchange industry heavyweights Intercontinental Exchange and CME Group as well as Michael Bloomberg’s financial information empire.
“This would be a bold move

in the shift among exchanges away from the matching of buyers and sellers and into the business of selling information,” said Kevin McPartland, head of market structure research at consultancy
Greenwich Associates. “Data are so valuable and so is having the network of traders and investors to access that data — that’s all at play here.”

The deal would also be a defining moment for the LSE’s chief executive, David Schwimmer, just
a year after the relatively unknown former Goldman Sachs banker was parachuted in to steady the ship.

Its scale will bring considerable risk in execution alongside the need to convince LSE shareholders that taking on Refinitiv’s $12bn of debt will prove worth it. Industry analysts see the strategic logic of the deal for the LSE, best known for its UK stock exchange and derivatives clearing house LCH.

While revenue from initial public offerings can be more volatile, spending by everyone from asset managers to hedge funds on financial data and the analytical tools to make use of it has been going in one direction.

It hit a record $30.5bn last year, according to a report from Burton Taylor Consulting. Refinitiv, which was carved out of Thomson Reuters by Blackstone only last year in the biggest leveraged buyout since the financial crisis, will give the LSE the Eikon terminals that aggregate financial
data and news for customers and compete with Bloomberg. Refinitiv’s data offering includes scores of standalone products from common market data to compliance services and trading tools, like the REDI platform previously owned by Goldman Sachs.