European regulators on Monday announced formal antitrust investigations into the London Stock Exchange’s proposed $27 billion million acquisition of financial data provider Refinitiv.
Announcing it will kick off a full-scale probe, the commission expressed concerns that the takeover may reduce competition in trading and clearing of various financial instruments and in financial data products.
“We have opened an in-depth investigation to assess whether the proposed transaction which will combine the activities of LSEG and Refinitiv would negatively affect competition in these markets. It is key for a well functioning financial market to ensure that market participants continue to have access to financial market infrastructure and financial data products on competitive terms,“ the notification states.
European Union antitrust regulators also cited the complexity and the massive amount of data involved in the deal, which would result in a “very large combined market share” in the electronic trading of European government bonds. And as Refinitiv and LSE have been leading venues, close rivals in this space, it suggests that it will be difficult for a new trading venue to attract clients in sufficient numbers and become a real alternative to their combined business.
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European competition authorities, which had previously proved to be an obstacle for cross-border alliances, would open a four-month long investigation following the end of its preliminary review. Back in 2017, antitrust regulators blocked London Stock Exchange’s £21 billion merger with Deutsche Boerse, citing monopoly concerns from combining Europe’s two largest stock exchange operators.
Refinitiv to become biggest shareholder in LSE
Both UK and US regulators cleared the all-stock deal, which was revealed in August 2019. The Committee on Foreign Investment in the United States (CFIUS) said the takeover doesn’t raise any national security concerns. The City watchdog also gave the purchase offer’s circular its backing in November, and LSEG’s shareholders also have overwhelmingly voted in favor of the institution’s planned buyout that will put them in competition with giants like Bloomberg.
Under the terms of the deal, the Blackstone-led Refinitiv will own 37 percent of the combined group, while its former owner, Thomson Reuters, will be holding a 15 percent stake. It would become the biggest shareholder in the London exchange, with the right to name three directors.
LSE said there is a lot of overlap with Refinitiv in areas including technology, property, and corporate functions, which allows for combining the data generated by the exchange with Refinitiv’s distribution and analytics.
The proposed takeover also helped strengthen Thomson Reuters’ profit metrics due to the positive revaluation of warrants that the company holds in Refinitiv after LSEG’s offer.