London Stock Exchange Group PLC agreed to acquire financial data analytics platform Refinitiv in an all-share transaction for a total enterprise value of approximately $27 billion.
LSE agreed definitive terms with a consortium including certain investment funds affiliated with Blackstone Group Inc., as well as Thomson Reuters Corp. Blackstone's consortium includes an affiliate of Canada Pension Plan Investment Board and certain co-investors.
The transaction will result in Refinitiv shareholders ultimately holding an approximate 37% economic interest in LSE and less than 30% of its total voting rights. Approximately 15% of the economic interest would be attributed to Thomson Reuters.
Thomson Reuters' interest in the LSE shares will be held in an entity jointly owned with Blackstone. Upon the closing of the transaction, Thomson Reuters is projected to indirectly own approximately 82.5 million LSE shares, which would have a market value of approximately $6.7 billion based on LSE 's closing share price on July 31.
Thomson Reuters' estimated ownership interest reflects its expected acquisition of an additional interest in Refinitiv pursuant to a warrant agreement entered into with Blackstone, which will be exercised in connection with the transaction closing.
The Blackstone/Thomson Reuters entity has agreed to be subject to a lock-up for their LSE shares for the first two years following closing. In each of years three and four following closing, the entity will be allowed to sell in aggregate one-third of the LSE shares issued to them. The lock-up arrangement will terminate on the fourth year after closing.
The proposed transaction is subject to LSE shareholders' approval, regulatory clearances and other customary closing conditions and is expected to close in the second half of 2020.
LSE said the combined business is targeting revenue compound annual growth rate of 5% to 7% over the first three years following completion, annual run-rate revenue synergy benefits in excess of £225 million and annual run-rate cost synergies in excess of £350 million by the end of year five after completion for the deal.
For LSE shareholders, the combined business is aiming for expected returns on invested capital in excess of investment criteria in the third year and expected adjusted EPS accretion of over 30% in the first full year following completion, increasing in years two and three.
LSE Chairman Don Robert, CEO David Schwimmer and CFO David Warren will hold the same roles in the combined business, while David Craig will continue as CEO of Refinitiv and join LSE's executive committee.
Goldman Sachs International, Morgan Stanley & Co. International PLC and Robey Warshaw LLP are the lead financial advisers to LSE, while Barclays is the corporate broker, financial adviser and sponsor. RBC Capital Markets acts as the corporate broker, while Oliver Wyman serves as the consultant.
For Refinitiv, Evercore, Canson Capital Partners, Jefferies and Eterna Partners are the advisers, while Guggenheim Securities LLC, TD Securities Inc. and Centerview Partners LLC serve as advisers to Thomson Reuters. Wachtell, Lipton, Rosen & Katz is the legal counsel of Thomson Reuters.
Separately, LSE reported total unaudited profit attributable to equity holders of £246 million for the first half, unchanged from a year ago. EPS for the period was 69.5 pence, compared to 69.7 pence a year earlier.
The group's total income for the half was £1.14 billion, up from the year-ago £1.06 billion. Cost of sale rose on a yearly basis to £109 million from £106 million.
Total revenue from continuing operations increased year over year to £1.02 billion from £953 million.
LSE booked depreciation, amortization and impairment costs of £174 million in the period, compared with £141 million a year ago.
The group will pay a dividend of 20.1 pence per share for the first half, compared to 17.2 pence per share a year earlier.