London exchange’s parent company has secured an initial approval from the Financial Conduct Authority (FCA) for its proposed $27 billion million acquisition of financial data provider Refinitiv. This clears the first hurdle for the all-stock deal to buy the former financial and risk business of Thomson Reuters, which was revealed in August.
“LSEG plc announces that the Listing Transactions Department of the Financial Conduct Authority (the “FCA”) has today approved LSEG plc’s shareholder circular in relation to the Transaction (the “Circular”),” the company said today.
The regulator gave the purchase offer’s circular its backing today, and LSEG is inviting its shareholders to a general meeting, scheduled for November 26, to approve the deal that will put them in competition with giants like Bloomberg.
The London Stock Exchange said in its statement that it expects the deal to close in the second half of 2020. However, the bourse operator still needs to secure more approvals as UK regulators are likely to scrutinize the takeover and its potential impact on market data costs.
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.
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“Given the Transaction is classified as a Reverse Takeover of LSEG, the Transaction is also conditional on the FCA and London Stock Exchange agreeing to re-admit LSEG plc’s enlarged voting ordinary share capital to the premium listing segment of the Official List and to trading on London Stock Exchange’s Main Market for listed securities (“Admission”),” it further explains.
Refinitiv to become biggest shareholder in LSE
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.
Refinitiv, whose Eikon terminals challenge those provided by Bloomberg, went private in October 2018 when Reuters completed the sale of its majority stake to a consortium led by private equity firm Blackstone Group for $20 billion. Thomson Reuters kept a 45 percent stake in the business.