London Stock Exchange Group PLC is nearing a deal to buy Refinitiv Holdings Ltd. in a massive expansion of its financial data services offering that will put it in direct competition with Bloomberg LP.
The potential deal, which the parties confirmed in statements, would result in a sizable gain for Refinitiv’s owners, led by buyout specialist Blackstone Group Inc. and Thomson Reuters Corp. The deal would value the company at about US$27-billion, including debt.
Thomson Reuters sold a 55-per-cent stake in what became Refinitiv to Blackstone and its partners in 2018 in a deal that valued the business at about US$20-billion.
In a statement, LSEG said it would issue new shares for Refinitiv’s equity, giving the data provider’s shareholders a 37-per-cent interest in the combined operation and 30 per cent of the voting rights. Blackstone’s partners in Refinitiv include Canada Pension Plan Investment Board and Singaporean sovereign wealth fund GIC.
Refinitiv had debt of US$13-billion at the end of December, according to Thomson Reuters’s financial statements.
If the deal is completed as discussed, Thomson Reuters would have a 15-per-cent interest in the overall business, which would have combined annual revenues of more than US$7.4-billion in 2018, LSEG said.
Thomson Reuters is more than 65-per-cent owned by Toronto-based Woodbridge Co. Ltd., the Thomson family holding company that also owns The Globe and Mail. A sale would further crystallize returns Woodbridge has reaped since 2008, when it bought Reuters Group PLC.
The Refinitiv partners intend to remain as long-term shareholders in LSEG, the stock-exchange operator said.
LSEG said the deal talks are being driven by the need to respond to the digital transformation taking place in financial markets and brisk customer demand for advanced data and analytics. An acquisition would offer expanded data and distribution as well as trading capabilities, plus a much further customer reach, it said.
A transaction could be announced as early as this week, although the parties cautioned that discussions could still end without a deal.
The rationale behind the creation of Refinitiv was for Thomson Reuters to gain a financial partner in Blackstone to provide stable, long-term capital to compete more aggressively for space on desks at banks, trading houses and hedge funds for its financial terminals. The company provides real-time securities and commodities pricing, private and public company information, research data and news from Reuters and other sources.
Today, Refinitiv leads all vendors, accounting for 24.9 per cent of the market globally, according to Burton-Taylor International Consulting. It is followed by archrival Bloomberg, with 21.2 per cent, and Morningstar with 12.8 per cent.
A completed deal would come after some unsuccessful acquisition attempts by the London bourse. In 2011, it launched a takeover bid for the owner of the Toronto Stock Exchange. That deal was rejected by shareholders and the TSX was acquired by a consortium known as Maple Group Acquisition Corp., which later renamed the operation TMX Group Ltd.
In 2017, a planned US$31-billion merger between LSEG and Deutsche Boerse, which would have created Europe’s biggest stock exchange, collapsed after Britain voted to leave the European Union and EU regulators blocked it.
The takeover of Refinitiv would be subject to regulatory and shareholder approval, LSEG said. It is not known how competition authorities in Britain and North America would assess the acquisition. Antitrust regulators could take 18 months to pore over the transaction and its effects, according to two unnamed sources cited by Reuters.
Officials with Blackstone, Thomson Reuters and CPPIB declined on Sunday to comment beyond what the companies said in statements acknowledging the discussions. A spokesperson for LSEG didn’t immediately respond to a request to comment.
Since announcing the sale to create Refinitiv in January, 2018, Thomson Reuters shares have climbed more than 55 per cent on the Toronto Stock Exchange. They jumped more than 4 per cent on Friday to close at $92.74 after a report about the talks in the Financial Times.
In last year’s deal to create Refinitiv, Thomson Reuters retained full ownership of the Reuters news agency as well as its tax and accounting businesses. It signed a US$325-million, 30-year deal to supply Refinitiv with Reuters content, and that arrangement will remain in place after a deal with LSEG, Thomson Reuters said.
LSEG said the parties were in advanced discussions about such aspects as the makeup of the executive team and board at the British-based company. LSEG chief executive David Schwimmer would retain his position, as would chairman Don Robert, it said.
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Jeffrey Jones