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Britain’s most prominent trading venue, the London Stock Exchange Group PLC (LSE:LN) is once again expanding its empire, having confirmed today that it is buying North American stock-index and asset management firm Frank Russell Co for $2.7 billion.
The exchange, based in the City of London’s prestigious and ultra-modern Paternoster Square, revealed last month to the Wall Street Journal that it was in talks with Northwestern Mutual Life Insurance company, the firm which owns Seattle-based Frank Russell Co, about a potential acquisition.
The purchase will be funded partly via a $1.6 billion rights issue, which will be launched in September, with the remainder to be funded from existing and new debt facilities.
London Stock Exchange Group is a veteran entity when it comes to large scale merger and acquisition activity, with the exchange having embarked on a ten year campaign of purchasing not only large investment businesses but also other national exchanges, as exemplified by its 2007 acquisition of Italian venue Borsa Italiana for $2 billion, led by then-incumbent Finance Director Jonathan Howell before his retirement after over 20 years service before moving to Close Brothers Group.
Since then, the group has entered into a joint venture with Tokyo Stock Exchange based on London’s Alternative Investment Market, and more recently on April 3 2012 London Stock Exchange and LCH.Clearnet shareholders voted overwhelmingly to take up to 60 percent of the clearing operator with an offer of 20 euros per share, which values LCH.Clearnet at 813 million euros ($1.1 billion), a shrewd investment which assisted in driving up revenues by 50% in the last financial year.
In terms of corporate structure, Frank Russell co currently comprises two specific business units. One of which is the Russell 2000 barometer of small stock performance in the United States, and the second being an investment business which is responsible for a not inconsiderable $256 billion in assets under management.
Frank Russell Co was an attractive proposition to many potential purchasers, all of which were large financial institutions including Canadian Imperial Bank of Commerce, with whom London Stock Exchange Group competed in order to gain the deal.
Despite the outlay, London Stock Exchange expects that it will recoup the purchasing costs associated with the acquisition of Frank Russell Co within the first full year on an aggregate basis.
Its former owner, life assurance and financial planning firm Northwestern Mutual, had owned Frank Russell Co since 1999 when it purchased it as a going concern for $1 billion.