FOR IMMEDIATE RELEASE
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR
IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO OR FROM ANY JURISDICTION WHERE TO DO
SO WOULD CONSTITUTE A VIOLATION OF THE RELEVANT LAWS OR REGULATIONS OF SUCH
JURISDICTION
THIS IS AN ANNOUNCEMENT AND NOT A CIRCULAR OR PROSPECTUS OR
EQUIVALENT DOCUMENT AND INVESTORS AND PROSPECTIVE INVESTORS SHOULD NOT MAKE ANY
INVESTMENT DECISION ON THE BASIS OF ITS CONTENTS. A CIRCULAR AND PROSPECTUS IN
RELATION TO THE TRANSACTION DESCRIBED IN THIS ANNOUNCEMENT WILL EACH BE
PUBLISHED IN DUE COURSE
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION
London, U.K., Toronto, CANADA (August 1, 2019)
— London Stock Exchange Group plc (“LSEG”) announces that it has agreed
definitive terms with a consortium including certain investment funds
affiliated with Blackstone as well as Thomson Reuters (together the “Refinitiv
Shareholders”) to acquire the Refinitiv business
(“Refinitiv”)
in an all share transaction for a total enterprise value of
approximately US$27 billion (the “Transaction”). Blackstone’s consortium includes an affiliate of Canada Pension Plan Investment
Board (“CPPIB“), an affiliate of GIC and certain co-investors (the “Blackstone
Consortium”). The
Transaction will result in the Refinitiv Shareholders ultimately holding an
approximate 37 per cent economic interest in LSEG and less than 30 per cent of
the total voting rights of LSEG.
The Transaction brings together
two highly complementary businesses (the “Combined Business”) to create a leading, UK headquartered, global financial markets infrastructure (“FMI“) provider with a leading data and analytics business, significant
capital markets capabilities across multiple asset classes, and a broad
post-trade offering, well positioned for future growth in a fast evolving
landscape.
The Transaction will enhance
LSEG’s existing customer offering by bringing together:
· LSEG’s diversified global
business focused on: Information Services through its financial indexing,
benchmarking and analytical services, FTSE Russell;
Post-Trade services through its leading global multi-asset CCPs, LCH and CC&G, and custody and settlement business; and Capital Markets
through its broad range of international equity, fixed income and derivatives
markets; and
· Refinitiv’s market data, analytics and execution
capabilities are across asset classes and focus on four core customer
segments; trading, investment and advisory, wealth, and risk management. In Data and Analytics, where Refinitiv is a leading
provider of company, economic, deal, pricing and reference data, low latency
real-time data and desktop analytics; in Venues, including the FXall and Matching Foreign Exchange (“FX”) trading platforms and the
Tradeweb fixed income trading platform (in which Refinitiv owns a majority
interest); and in Risk, where a range of products supports compliance and
regulatory needs for a broad number of financial and corporate clients.
The Combined Business will be
well positioned in all key geographies and will offer significant customer
benefits across the full range of LSEG’s businesses by: extending its trading
capabilities across asset classes; expanding its data content, management and
distribution capabilities; increasing its global footprint and range of
customer offerings; and enabling LSEG, Refinitiv and their customers to benefit
from future data and technology -enabled innovation and growth opportunities.
Together, LSEG and Refinitiv generated combined annual revenue of over £6
billion in 2018, which would have made the Combined Business the largest listed global FMI provider by
revenue last year.
Strategic highlights
The LSEG Board (the “Board“) believes the Transaction will:
· Transform LSEG’s position as a
leading global FMI group,
strengthening its global footprint and accelerating its strategy;
· Significantly
enhance LSEG’s customer proposition in data and analytics, accelerating
opportunities using intellectual property (“IP”) toprovide
innovative new services;
· Create a global multi-asset
capital markets business with the addition of high-growth foreign exchange and
fixed income venues; and
· Deepen and expand LSEG’s and
Refinitiv’s shared core principles of customer partnership and open access.
Financial highlights and outlook
· Combined Business targeting
delivery of revenue compound annual growth rate (“CAGR”) of 5 to 7 per
cent over the first three years following completion of the Transaction (“Completion”),
achieved through the continued performance of LSEG’s current businesses, the
completion of the ongoing transformation of Refinitiv, future growth drivers
across both businesses and targeted annual run-rate revenue synergy benefits in
excess of £225 million by the end of year five following Completion.
· Improved business mix with
recurring revenue increasing from approximately 40 per cent for LSEG standalone
to around 70 per cent for the Combined Business based on combined annual
revenue for 2018.
· Targeting annual run-rate cost
synergies in excess of £350 million by the end of year five following
Completion, and significant additional benefits from refinancing Refinitiv’s
existing debt.
· Targeting combined adjusted
EBITDA margin of around 50 per cent in the medium term following Completion.
· Enhanced returns for LSEG
shareholders, with expected returns on invested capital in excess of investment
criteria in the third year following Completion and expected adjusted earnings
per share accretion of over 30 per cent in the first full year following Completion,
increasing in years two and three.
· High level of recurring
revenue and strong cash generation to support the maintenance of LSEG’s
progressive dividend per share policy, balanced by a focus on returning LSEG’s
leverage to its target range of 1.0-2.0x in
the 24 to 30 months following Completion, consistent with LSEG’s existing
capital management policy.
Other Key Transaction Terms
Governance and management
· The Combined Business will be
chaired by Don Robert, LSEG’s Chairman, and led by David Schwimmer, as Chief
Executive Officer, with David Warren as Chief Financial Officer. David Craig
will join LSEG’s Executive Committee and continue as Chief Executive Officer of
Refinitiv.
· Refinitiv Holdings Ltd (“Refinitiv Holdings”), which is a company owned by the Refinitiv
Shareholders and that currently owns Refinitiv, will be entitled to nominate,
subject to, among other considerations, certain regulators not having objected
to the proposed nominees:
(i) three non-executive Board members (any such nominee being a “Refinitiv
Director”) for as long as they hold at least 25 per cent of LSEG;
(ii) two Refinitiv Directors for as
long as they hold at least 17.5 per cent but less than 25 per cent of LSEG; and
(iii) one Refinitiv Director for as
long as they hold at least 10 per cent but less than 17.5 per cent of LSEG.
For so long as the Refinitiv Shareholders are
entitled to nominate three Refinitiv Directors, one such nominee will be a
representative of Thomson Reuters. The other two nominees will be
representatives of Blackstone. LSEG will remain in compliance with the UK
Corporate Governance Code following Completion.
· LSEG’s global business will continue to be headquartered in London with
a premium listing on the official list of the FCA (the “Official List“) and traded on the London
Stock Exchange’s Main Market for listed securities as London Stock Exchange
Group plc under ticker symbol LSE.L.
Lock-up
and standstill
· The Transaction will result in Refinitiv Holdings and BCP York Holdings
(Delaware) L.P. (“ConsortiumCo”), a vehicle owned by the Blackstone Consortium,
ultimately holding an economic interest in LSEG equal to approximately 37 per
cent and less than 30 per cent of the total voting rights of LSEG.
· The Refinitiv Shareholders will,
through their interests in Refinitiv Holdings, have an important investment in
the Combined Business and will be supportive long-term shareholders after Completion. Accordingly, Refinitiv Holdings and ConsortiumCo have agreed
to be subject to a lock-up for the first two years following Completion. The
lock-up arrangements will apply to all of the consideration shares issued by
LSEG, with the exception of 5,781,285 shares, which will be tradeable at any
time after 30 days from Completion to allow the Refinitiv
Shareholders to fund certain Transaction-related expenses. In each of years
three and four following Completion, Refinitiv Holdings and ConsortiumCo will
become entitled to sell in aggregate one-third of the shares issued to them.
The lock-up arrangement will terminate on the fourth anniversary of Completion.
Once Refinitiv Holdings and ConsortiumCo are released from the lock-up, any
disposals of shares will be subject to orderly marketing restrictions. A
standstill restriction will also apply to Refinitiv Holdings, ConsortiumCo and
the Refinitiv Shareholders (under which they will agree not to, among other
matters, acquire further shares in, or make a takeover offer for, LSEG) until the third
anniversary of Completion (and thereafter for so long as Refinitiv Holdings and
ConsortiumCo hold at least 10 per cent or more of LSEG or have a Refinitiv Director appointed to the Board). For the duration of
the standstill, Refinitiv Holdings and ConsortiumCo have committed to vote in
line with the Board’s recommendation on resolutions to be voted on by LSEG
shareholders at a general meeting (including an annual general meeting) subject
to certain exceptions.
Steps to Completion
· The Transaction
is conditional, among other things, upon:
(i)
approval of the Transaction by LSEG
shareholders (by ordinary resolution) at a general meeting (the “General Meeting”) of LSEG;
(ii)
given the
Transaction is classified as a Reverse Takeover under the Listing Rules of the
FCA, the publication by LSEG of a prospectus (the “Prospectus”) and the FCA and London Stock Exchange agreeing
to admit LSEG’s enlarged ordinary share capital to the premium listing segment
of the Official List and to trading on the London Stock Exchange’s Main Market
for listed securities;
(iii) there having been no breach of the representations
and warranties that has had a material adverse effect on LSEG or Refinitiv
between signing and Completion;
(iv) relevant competition approvals being obtained,
including in the EU and the US; and
(v)
relevant
financial regulatory approvals being obtained, including in the UK, France,
Italy and the US.
· The approval
of LSEG shareholders will be sought at the General Meeting, which will be convened before the end of 2019. Completion is expected
to occur during the second half of 2020.
Commenting on the Transaction, Don
Robert, Chairman, LSEG, said:
“This transaction is a defining moment for LSEG
in terms of its strategic importance. It will create substantial value for our
shareholders and important benefits for our customers, employees and other
stakeholders. The Board and I look forward to welcoming Blackstone and Thomson
Reuters as supportive, long-term shareholders as we work together to realise
the compelling benefits of this transaction.”
Commenting on the Transaction, David
Schwimmer, CEO, LSEG, said:
“With the acquisition of Refinitiv, we will
transform our position as a leading global Financial Markets Infrastructure
group. Refinitiv brings highly complementary capabilities in data and capital
markets, as well as deep customer relationships across a truly global business.
We share a commitment to open access and to partnering with our customers to
deliver innovative solutions across the financial markets value chain. Our
shareholders and customers will benefit from attractive top line growth
prospects, substantial cost and revenue synergies, as well as ongoing
efficiency initiatives, and this transaction will ensure we are well positioned
for future growth in an evolving landscape.”
Commenting on the Transaction, Martin
Brand, Senior Managing Director at Blackstone, said:
“Refinitiv has been an outstanding performer for
Blackstone and our partners Thomson Reuters, CPPIB, and GIC. We believe the
combination announced today creates a strongly positioned leader in financial
markets infrastructure, and we are excited about the continued prospects of
Blackstone’s investment as a long-term partner of LSEG.”
Commenting on the Transaction, David
Craig, CEO, Refinitiv, said:
“LSEG’s business is highly complementary with
Refinitiv’s leading global data platform, transaction and distribution network.
Our aim is to capture the opportunity of data which we believe is driving
unprecedented change in the global financial community. The combined business
will allow us to better serve customers across all regions. Our two companies
both have strong heritages, a shared approach to open access and partnership,
and we are excited to work with the LSEG team to create a leading financial
markets infrastructure group and to continue to invest in our business.”
About
CPPIB
Canada Pension Plan Investment Board (CPPIB) is a professional
investment management organization that invests the funds not needed by the
Canada Pension Plan (CPP) to pay current benefits in the best interests of 20
million contributors and beneficiaries. In order to build a diversified
portfolio, CPPIB invests in public equities, private equities, real estate,
infrastructure and fixed income instruments. Headquartered in Toronto, with
offices in Hong Kong, London, Luxembourg, Mumbai, New York City, São Paulo and
Sydney, CPPIB is governed and managed independently of the Canada Pension Plan
and at arm’s length from governments. At March 31, 2019, the CPP Fund totalled
C$392 billion. For more information about CPPIB,
please visit www.cppib.com or follow us on LinkedIn, Facebook or Twitter.
Article Contacts
CPPIB
Darryl Konynenbelt
Director, Global Media
Relations
T: +1 416 972 8389
dkonynenbelt@cppib.com