(Reuters) - London Stock Exchange Group Plc LSE.L shares rose more than 15% to a record high on Monday as investors cheered its $27 billion (£22 billion) bid to buy financial data firm Refinitiv Holdings Ltd, in a deal that could transform the exchange operator into a global market infrastructure and data giant.
Investors and analysts said a deal would make strategic sense and come at an attractive price, while posing less regulatory risk than previous failed tie-ups in the sector.
LSE has said negotiations for the deal -- the largest ever attempted by an exchange operator per Refinitiv data -- are at an advanced stage. Refinitiv is owned by buyout fund Blackstone Group Inc BX.N and Thomson Reuters Corp TRI.TO. Sources told Reuters on Sunday that the deal could be announced this week.
“A tie-up would give the combined entity the blend of market data and diagnostics, and news flow and analysis, that could present a material and formidable competitor for Bloomberg, which in recent years has become the preferred provider for many fund managers,” said James Bevan, chief investment officer at fund manager CCLA, which has a small stake in LSE.
Spokespeople for Bloomberg, Blackstone and Thomson Reuters all declined to comment. LSE and Refinitiv could not be reached for comment after hours.
The proposed deal, which is valued at $27 billion including debt, comes less than a year after Blackstone bought a majority stake in Refinitiv from Thomson Reuters in a $20 billion deal. Thomson Reuters, the parent company of Reuters News, holds a 45% stake in Refinitiv.
Refinitiv had $12.2 billion in debt as of the end of December, as a result of its leveraged buyout by Blackstone, which LSE would assume under the proposed deal.
LSE’s shares surged 15.3% on Monday to close at a record 6,562 pence. Refinitiv’s bonds, issued when Blackstone bought Thomson Reuters’ Financial and Risk business to form Refinitiv, also rallied across the curve.
A senior unsecured US dollar November 2026 bond 31740LAC7= rose 5 cents on the dollar to 109.5, sending the yield – which moves inversely to price – to 5.4791% from 7% at the end of last week.
Thomson Reuters’ Toronto-listed shares closed down 3.1% on Monday.
(GRAPHIC: Exchanges Race To Grow - tmsnrt.rs/2yiGjex)
A merger with Refinitiv would significantly expand LSE’s information services business, which the bourse operator has been building as a more stable source of cash flow than its primary transaction-reliant businesses.
JP Morgan analysts said the deal would boost LSE’s data, analytics and distribution capabilities, and expand its footprint internationally, particularly in the United States. It would also diversify LSE’s asset class mix, expanding its business in foreign exchange and fixed income.
LSE rival Deutsche Boerse AG DB1Gn.DE had been in talks to buy Refinitiv's FX trading platform FXAll, but said on Saturday that the deal was unlikely to complete.
Some shareholders expressed concerns about LSE’s ability to fully integrate the new companies and maximise potential synergies and cost-savings.
LSE shareholder Royal London Asset Management (RLAM), which holds 0.98% of LSE, said it wanted more information about Refinitiv’s business lines.
“We are eager to hear more from management as to their quality and ability to integrate them,” Mike Fox, head of sustainable investments at RLAM, said in an email.
(GRAPHIC: LSE in talks to buy Refinitiv for $27 billion - tmsnrt.rs/2yhaDWS)
LSE’s last attempt at a transformational deal collapsed in 2017 when European regulators blocked a tie-up with Deutsche Boerse due to concerns about overlaps in their bond-processing businesses.
LSE’s proposed deal with Refinitiv is expected to face a long antitrust review, four sources previously told Reuters, although investors and analysts said they did not anticipate any material problems.
The tie-up would create little overlap in trading, although Berenberg analysts said regulators are likely to look at the impact of combining Refinitiv’s over-the-counter trading platforms with LSE’s clearing business. In the past, regulators have wanted firms to have a choice over whom they clear through.
Investors said regulators may also examine whether the deal would give LSE too much pricing power over exchange data fees, an area that has attracted increasing scrutiny in the Europe and United States.
“Data and the pricing of it: that’s where most of the scrutiny would come from,” said a top-30 investor in LSE who spoke on the condition of anonymity.
(GRAPHIC: LSE in talks to buy Refinitiv for $27 billion - tmsnrt.rs/2ymvLuU)
(GRAPHIC: LSE's spend on acquisitions in the decade - tmsnrt.rs/2ymw7lg)
Reporting by Noor Zainab Hussain in Bengaluru and Simon Jessop in London; Additional reporting by Sinead Cruise, Abhinav Ramnarayan in London and David French in New York.; Editing by Rachel Armstrong; Alexander Smith, Michelle Price and Leslie Adler
Our Standards: The Thomson Reuters Trust Principles.