LONDON, Aug 1 (Noor Zainab Hussain and Huw Jones/Reuters) - Britain's London Stock Exchange has agreed to buy financial information provider Refinitiv in a $27 billion deal aimed at offering trading across regions and currencies and positioning the company as a competitor to Bloomberg.
The deal announced on Thursday, which is subject to regulatory and LSE shareholder approval, will transform it into a major distributor as well as creator of financial market data.
"This transaction is a defining moment for LSE in terms of its strategic importance," its chairman Don Robert said in a statement confirming the deal, which will help LSE expand its trading business beyond shares and derivatives into currencies by taking on Refinitiv's FXALL and matching platforms.
"Increasingly our customers want to trade across different regions and currencies," LSE Chief Executive Schwimmer said on a call with journalists following the deal, which comes ten months after a Blackstone-led consortium completed a leveraged buyout of Refinitiv from Thomson Reuters.
The transaction marks a rapid turnaround for the U.S. private equity group which is set to double the value of its investment, a person familiar with the deal said.
Under the deal, Refinitiv shareholders will ultimately hold around a 37% LSE stake but less than 30% of total voting rights.
LSE's shares rose more than 6% to a record high of 7,152 pence after it posted an 8% rise in first-half total income to 1.1 billion pounds ($1.33 billion) and confirmed the terms of the deal, which was initially announced last week.
LSE said Robert will continue to chair the enlarged company and LSE chief executive David Schwimmer will remain in post, while Refinitiv chief executive David Craig will join LSE's executive committee and continue to run that business.
'COMPELLING'
EU competition regulators blocked LSE's attempt to merge with rival Deutsche Boerse, the exchanges' fifth attempt to combine, in 2017 and sources close to the Refinitiv deal expect full competition investigations, which could take a year to 18 months..
But LSE executives said they were confident the "rare and compelling" deal would make it past the regulators.
"We have two very complementary businesses, they are more complementary than they are overlapping," Schwimmer said.
Asset managers have told regulators that exchanges are charging too much for data on share prices and LSE stressed that it would retain its commitment to "open access" after the deal.
"The issue is largely a U.S. issue in terms of concern around market data pricing," Schwimmer said, adding that LSE had no plans for any divestments.
While Schwimmer said it was too early to comment on possible job losses, LSE Chief Financial Officer David Warren said the areas where there were overlaps that could yield cost savings include property, technology and corporate services.
LSE expects the deal to complete by the second half of 2020.
BREXIT SCENARIOS
The deal comes amid uncertainty over Britain's exit from the European Union and Blackstone and Thomson Reuters run the risk that LSE shares could fall if Britain leaves without a deal.
New Prime Minister Boris Johnson has vowed to take Britain out of the bloc by October 31 with or without a deal, sending the pound to is lowest level in more than two years.
Operationally, LSE has reorganised some of its EU-exposed businesses, opening an Amsterdam hub for its Pan-European stock platform Turquoise, and shifted European government bond trading to the Milan arm of its MTS platform.
"We are prepared for whatever may come from the various Brexit scenarios," Schwimmer said, adding that a "global footprint" was driving the deal rather than Brexit.
NEWS DEAL: REUTERS BENEFITS
Blackstone's consortium, which includes Canada Pension Plan Investment Board and Singaporean sovereign wealth fund GIC Special Investments Pte Ltd, holds a 55% stake in Refinitiv.
Thomson Reuters, which owns 45% of Refinitiv and is the parent company of Reuters, will hold 15% of LSE, the Canadian company said in a separate statement.
The company added that the agreement signed at the time Refinitiv was sold to the Blackstone-consortium for Reuters to supply news to Refinitiv for 30 years would remain in place.Thomson Reuters Corp raised its sales and core profit outlook for 2019 and 2020 on Thursday after reporting 4% organic revenue growth in the second quarter, which it said was its best since 2008 and ahead of its expectations.
Growth was driven by recurring revenues at all three of its biggest units since the news and information provider sold a majority in its Financial and Risk business, now known as Refinitiv, to Blackstone last year - Legal, Corporates and Tax & Accounting.
The company said that it and Blackstone had agreed to sell Refinitiv, which provides data and news to financial customers, to London Stock Exchange in a $27 billion all-share deal.
Thomson Reuters will hold a 15-percent stake in the London Stock Exchange on completion of the deal, which is expected in the second half of 2020, the companies said. A Thomson Reuters representative will also sit on the LSE board.
A $10-billion share buyback and the launch of new products following the Blackstone deal have propelled Thomson Reuters stock 85 percent higher since May last year, and the shares hit an all-time high of C$90.04 this week.
"We believe we are well positioned for future growth, and now expect 2019 and 2020 revenue growth and adjusted EBITDA to each be at the upper end of the guidance ranges previously provided," Chief Executive Jim Smith said in a statement.
The parent of Reuters News had forecast 2019 revenue growth of 7% to 8.5% before the effect of currency, and growth of about half that pace in 2020.