London Stock Exchange Eyes $27 Billion Bet for Blackstone’s Refinitiv

London Stock Exchange


LSE 0.82%

Group PLC said early Saturday it is in advanced discussions to buy financial-information and terminal business Refinitiv Holdings Ltd. from a

Blackstone Group
Inc.


BX 0.04%

-led consortium for about $27 billion including debt, in one of the biggest bets yet on data as a new source of growth for global exchange operators.

Stock-exchange operators face growing pressure on fees they generate from the buying and selling of stocks amid new competition and computerized trading. That has historically pushed exchange businesses to buy up rivals to boost revenue and cut costs. But the European Union’s decision in 2017 to block the LSE’s $30 billion merger plan with Germany’s

Deutsche Börse
AG


DBOEF 0.43%

—one of several big exchange deals to be upended in recent years—shows this consolidation strategy can be difficult to execute.

The acquisition of Refinitiv is meant to help the LSE meet that challenge by further expanding its business as a data provider to investors and companies. Last year, the LSE’s information-services business grew revenue by 9% to £841 million ($1.04 billion) from the year-earlier period, benefiting from strong growth in subscription-renewal rates and data sales for its exchange-traded-fund products. That growth rate was more than double the LSE’s more traditional capital-markets business.

Refinitiv would give the U.K.-based exchange operator access to its data and analytical tools such as the Eikon financial-data terminal and other products that are used by more than 40,000 customers, including brokerage firms, institutional investors, governments and corporations. Refinitiv also operates the Tradeweb, FXAll and Matching platforms among others that handle on average daily trading volume of over $400 billion in foreign exchange and $500 billion in fixed income.

The LSE is negotiating to acquire Refinitiv from Blackstone, which together with its partners Canada Pension Plan Investment Board and Singapore’s GIC Pte own about 55% of the financial-data company, and

Thomson Reuters
Corp.

, a holder of a 45% stake in the business.

The exchange operator cautioned that the talks could still collapse. But if an agreement is reached, the deal would create a company with combined annual revenue of more than £6 billion, more than triple the revenue that the exchange operator generated last year. The LSE also said the deal would generate annual cost savings exceeding £350 million that would be achieved in the five years after the deal’s completion.

Still, the acquisition would represent a risky bet for the LSE’s newly appointed chief executive, David Schwimmer,  an ex-

Goldman Sachs Group
Inc.

banker who has been in the top job for just under a year. The Blackstone-led group acquired its majority stake in Refinitiv last year in a deal that valued the operation then at $20 billion. That is not much less than LSE’s current market value of about $24.5 billion, underscoring the risk the exchange group is exposing itself too if the deal soured.

The size alone would dwarf some of the recent data-related transactions in the exchange space, such as

Nasdaq
Inc.

’s $220 million acquisition earlier this year of Swedish financial-technology provider Cinnober.

By pursuing Refinitiv, LSE management would likely face a monthslong regulatory review of the transaction and a complex integration process as it seeks to achieve the deal’s revenue and cost-cutting benefits. Furthermore, the deal could potentially be dilutive to shareholders as the LSE said that it would use stock to help fund the deal.

The LSE’s stock price has surged roughly 42% since the middle of December, allowing the company to more easily contemplate a stock deal for Refinitiv. Still, the deal’s inherent risk could spur shareholder opposition if the bet jeopardizes that stock-price gain.

In a deal with Refinitiv, LSE indicated that it would own about 63% of the enlarged company, which would continue to be based in London. That is key to U.K. support for the deal since London is fighting to hold on to its role as a financial center once the country carries out its divorce from the EU as early as this October.

Refinitiv’s shareholders would own about 37% of the enlarged LSE and hold less than 30% of the total voting rights.

Write to Ben Dummett at ben.dummett@wsj.com

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