LSE is Europe’s leading exchange group in cash equities. MTS is Europe’s largest electronic government bond market, LCH and CC&G offer post-trade services and FTSE Russell provides benchmark indices and related data services.
Following withdrawal of HKEX’s takeover approach in October, LSE continues to pursue its proposed transformational acquisition of Refinitiv. Its activities include: data, distribution, analytics and workflow (75% of revenue); FX and fixed income trading venues (19%); and risk and other activities (6%). The vendors, including Blackstone and Thomson Reuters, will hold a 37% stake in LSE but less than 30% of voting rights. The enterprise value at an LSE share price of c £70 would be c $30bn, of which c $12.5bn is assumed debt. The EV/adjusted FY18 EBITDA multiple would be c 13.6x. Targets include year 5 revenue and cost synergies of £225m (3.5%) and £350m (7%), respectively, a three-year post deal revenue CAGR of 5–7% and a medium-term EBITDA margin of 50%.
The transaction requires shareholder (GM Nov), competition and regulatory approvals and is expected to complete in H220. It will shift LSE’s emphasis further towards the structurally attractive area of data management and analytics and rebalance revenues so that they are more global, more diverse in terms of asset class and with a higher % of recurring revenues (c 70% vs 40%). LSE’s Q3 update showed total income up 12% with growth across the group.