LSE group acquires US stock market indices provider Frank Russell
26 June 2014
Frank Russell Company, one of the leading providers of stock market indices has been acquired by the London Stock Exchange in its bid to expand its information services offering, particularly in the US.
The London Stock Exchange Group (LSEG) would pay $2.7 billion (£1.59 billion) in cash to Northwestern Mutual and other minority shareholders of Russell, and would add its indices offerings to its own FTSE indices products.
Approximately $1.6 billion of the consideration will be financed from the net proceeds through an underwritten rights issue to be made in September following shareholder approval of the transaction, with the remaining financed from existing and new LSEG bank debt facilities.
Frank Russell provides investment management services and has $256 billion worth of assets under its management. According to the LSE, it would undertake a comprehensive review of Russell's investment management business to determine its positioning and fit with the group.
"The acquisition of Russell is another significant milestone for LSEG. It sits squarely with our diversification strategy, builds on one of our core strengths in intellectual property and provides another key driver of growth by growing our presence in the US, the largest global financial services market,'' said Xavier Rolet, chief executive officer of the London Stock Exchange Group, in an advertisement statement.
"LSEG and Russell are two of the most highly respected financial services firms in the world, and this joining of the two organisations offers many strategic benefits,'' said Len Brennan, president and chief executive officer of Russell, who will join the executive committee of the LSEG after the acquisition, In The LSE statement.
LSE said the acquisition is a rare opportunity to acquire a high quality US business with a leading global brand providing index and investment management services
A combination of Russell's index business with FTSE would bring together $5.2 trillion of assets benchmarked to Russell and an estimated $4.0 trillion of equities benchmarked to FTSE.
LSE said it expects "annual run-rate cost synergies of $78 million by the end of year three, and annual run-rate revenue benefits of $30 million and $48 million (£28 million) by the end of years three and five, respectively."