In a bid to diversify and bolster its index business, the London Stock Exchange plc (LSE) has reached a deal to buy Russell Investments for US$2.7 billion.
The LSE has been in talks to acquire Russell from its parent company, U.S.-based Northwestern Mutual Life Insurance Co., for several months. Today, the firms finally announced that they have reached a deal, which still requires the approval of regulators and LSE shareholders.
The exchange says that the deal represents “a rare opportunity to acquire a high quality U.S. business with a leading global brand providing index and investment management services.” It notes that combining Russell’s index business with its FTSE index business will create a global leader in index services, and the number two player in U.S.-listed ETFs. It also accelerates the exchange’s diversification strategy.
About US$1.6 billion of the price will be financed by a new rights issue from the LSE, with the rest coming from its existing bank debt facilities. The LSE expects the deal to be accretive in the first full year on an aggregate basis, with Russell’s index business accretive on a standalone basis within two years.
“The acquisition of Russell is another significant milestone for [the LSE]. 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 of the LSE.
“Russell’s index management business is a strong strategic fit with FTSE,” he added. “With this acquisition we are strongly positioned for the changing dynamics in the global indices market with a best in class offering, which we believe will help deliver outstanding returns for our shareholders.”
Rolet also noted that the LSE will work with Russell’s management team to “review the investment management business and determine its fit with the group.”
Russell’s president and CEO, Len Brennan, said: “The combination of our index business with FTSE creates a truly global index leader, with a highly complementary fit of products and distribution capabilities and a unique position as a leader in major domestic market benchmarks as well as international equities.”