By Noor Zainab Hussain
(Reuters) - London Stock Exchange (L:LSE) shares rose more than 15% to a record high on Monday after it said it was in talks to buy financial data firm Refinitiv, in a deal worth $27 billion including debt.
The proposed deal, which would turn LSE into a global player in financial data and expand its footprint in foreign exchange and fixed income, comes less than a year after Blackstone (N:BX) bought a majority stake in Refinitiv from Thomson Reuters (TO:TRI), which valued it at $20 billion.
LSE's shares were 15% higher at 6,520 pence at 1110 GMT on Monday after hitting a record high of 6,562 pence, taking them to the top of London's bluechip index (FTSE).
Thomson Reuters, the parent company of Reuters, holds a 45% stake in Refinitiv. A person familiar with the matter told Reuters that if the negotiations conclude successfully, a deal could be announced this week.
LSE shareholder Royal London Asset Management (RLAM) said it was right the exchange expanded further into data, but that 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, holds 0.98% of LSE, said in an email.
Refinitiv's bonds, issued when Blackstone bought Thomson Reuters' Financial and Risk business to form Refinitiv, rallied across the curve on Monday.
For example, 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.
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.
(GRAPHIC - Exchanges Race To Grow: https://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 be strategically sensible, and in line with the LSE's strategy to focus on deals that extend into growth areas such as data and analytics and to complement existing businesses.
LSE tried to merge with rival Deutsche Boerse AG (DE:DB1Gn) in 2017, their fifth attempt to combine, but the deal collapsed when European regulators blocked it due to concerns about overlaps in their bond processing businesses.
Deutsche Boerse had been in talks to buy Refinitiv's FX trading platform FXAll but said on Saturday that the deal was unlikely to complete.
Deutsche Boerse's shares were 2.1% lower at 124.8 euros.
(GRAPHIC - LSE in talks to buy Refinitiv for $27 bln: https://tmsnrt.rs/2yhaDWS)
ANTI-TRUST REVIEW
LSE's proposed deal is also expected to face a long antitrust review, four sources told Reuters.
Berenberg analysts said the size of the proposed deal makes a detailed competition review almost inevitable, with regulators likely to look at the impact of combining Refinitiv's over-the-counter trading platforms with LSE's clearing business.
"We do not anticipate any deal to fall foul of anti-trust concerns," the analysts said.
(GRAPHIC - LSE's spend on acquisitions in the decade png: https://tmsnrt.rs/2ymw7lg)
(GRAPHIC - Exchanges Race To Grow: https://tmsnrt.rs/2yiGjex)