The London Stock Exchange Group this month announced terms to acquire data provider Refinitiv for $27 billion. Together, LSEG and Refinitiv would be the largest listed global financial markets infrastructure provider by revenue, with annual revenues of over £6 billion (U.S. $7.3 billion) in 2018.
“There can be no certainty that a transaction will be forthcoming,” LSEG said in a statement. “Any transaction would be conditional, inter alia, upon the approval of LSEG shareholders and anti-trust and regulatory clearances, as well as other customary conditions.”
In an Aug. 1 conference call, LSEG CEO David Schwimmer explains the significance of the acquisition: “Financial market’s infrastructure is a rapidly evolving sector and one where the needs of our customers are changing,” he said, adding that he has seen firsthand how the market landscape has changed as someone who has been closely involved in the industry for the last 20 years.
“Increasingly, our customers want to trade across different regions and currencies with fewer firms that can do more for them across the value chain—from capital markets to data to clearing and settlement,” Schwimmer said. “In this evolving landscape, [the financial market’s infrastructure] needs to be global, cover multiple asset classes, and have deep data management, analytics, and distribution capabilities. This is something we are consistently hearing from our clients and further developing these capabilities has been a strategic priority for the group.”
“The acquisition of Refinitiv is transformational and significantly accelerates our existing strategy to be a leading, global financial market infrastructure provider,” Schwimmer continued. “Refinitiv brings highly complementary capabilities in data, analytics, and capital market, as well as deep customer relationships across a truly global business. As a result, we will significantly expand our data and analytics offering and create a global, multi-asset class, capital markets business.”
To understand more about the acquisition, it helps to first understand the services that Refinitiv provides. As a data and financial market infrastructure provider, Refinitiv provides services to 40,000 customers across the buy-side, the sell-side, as well as to companies. “We collect data and deliver services into every major financial center and across 190 countries,” said Refinitiv CEO David Craig on the conference call.
Refinitiv’s business offerings are grouped into the following three business areas:
- Data distribution analytics and workflow: This is the largest part of the business, representing 75 percent of Refinitiv’s total business. “We operate one of the most expansive data and data management platforms in the financial market, distributing thousands of data types and billions of messages and data updates a day,” Craig said. “We capture and distribute real-time and non-real time data from over 150,000 sources, including exchanges, brokers and contributors and distributors from both public and private sources and data partners.”
- Trading venues: Refinitiv runs significant venues in OTC markets—including FX, dealer-to dealer, and dealer-to-client—which represents 19 percent of the business. This area of the business is seeing rapid growth “due to global volatility in FX, expansion into emerging markets—such as Indonesia, China, and Thailand—and shift from voice to electronic trading,” Craig said.
- Risk capabilities: This area of the business—risk analytics and data—helps clients manage their financial-crime risk, as well as to manage, onboard, and screen suppliers, customers, and partners and is driven by increasing regulatory risk and compliance and the need to digitize client and third-party onboarding.
“As a result of the transaction, we will be able to offer new and enhanced services to benefit our customers and our employees,” Craig said.
The transaction will create a business with global scale and geographic diversification in key markets, including North America and emerging markets like Asia, Schwimmer said. “This provides an opportunity to broaden the number and type of customers we work with—such as in the area of wealth management, where Refinitiv has a significant U.S. footprint,” he said.
The acquisition also strengthens LSE’s multi-asset markets capabilities through the addition of FX and fixed income—the two largest traded asset classes globally. Specifically, LSEG will gain Refinitiv’s majority stake in the bond trading platform Tradeweb and outright ownership of currency trading platform FXall. “Importantly, this will all be underpinned by world-class data content, management, and distribution capabilities where Refinitiv has the expertise and scale of a top-tier global data provider,” Schwimmer said.
“Data is already a critical driver of market infrastructure today,” Schwimmer said. “Our customers are demanding more data and data-enable services. This trend will only continue.”
Management and governance
The combined business will be chaired by LSEG’s Chairman Don Robert and led by Schwimmer, with David Warren as CFO. Craig will join LSEG’s executive committee and continue as CEO of Refinitiv.
Additionally, three new members will be added to the board: two from Blackstone and one from Thomson Reuters. (Refinitiv is currently 55 percent owned by private equity funds managed by Blackstone and 45 percent by Thomson Reuters).
LSEG will remain in compliance with the U.K. Corporate Governance Code following completion. LSEG’s global business continues to be headquartered in London. LSEG will retain its Premium Listing on the Official List of the FCA and trade on London Stock Exchange plc’s Main Market for listed securities.