LSE unveils $1.6 billion rights issue for Frank Russell deal

Fri Aug 22, 2014 2:07pm EDT
 
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By Pamela Barbaglia and Clare Hutchison

LONDON (Reuters) - London Stock Exchange Group Plc is raising 938 million pounds ($1.6 billion) in its first rights issue of new stock to part fund the acquisition of U.S. indexes group Frank Russell.

Europe's oldest independent bourse unveiled plans to buy Frank Russell for $2.7 billion in June to move deeper into the U.S. financial services market, where half of global assets under management (AUM) are based. LSE said then it would help fund the purchase by issuing new shares.

The exchange said on Friday it would offer 74,347,813 new shares at 1,295 pence apiece, a 30.1 percent discount to their Aug. 21 closing price. Shareholders will have the right to buy three new shares for every 11 already held.

The deal gives LSE, owner of indexes business FTSE, third place in the booming market for exchange traded funds (ETFs), low-cost funds giving an alternative to active fund management, after market leaders S&P Dow Jones and MSCI.

The discount compares with a typical 30 to 40 percent range seen in similar recent UK deals, such as defence group Babcock's $1.8 billion rights issue, in which the shares were offered at a 34.5 percent discount, according to data compiled by Barclays.

David Warren, LSE's chief financial officer, said the size of the discount showed strong support for the Russell deal. "We have been in close contact with our major shareholders ... and there has been positive reception to the acquisition."

LSE shares closed 1.2 percent higher at 2,029p. The stock has risen more than 2 percent since details of the acquisition were given in June.

The deal, which is expected to boost earnings in the first full year after the merger, will create an index compiler with some $9.2 trillion of assets benchmarked against the performance of its market measures, which include the UK's FTSE 100.   Continued...

 
A man walks through the lobby of the London Stock Exchange August 5, 2011.REUTERS/Suzanne Plunkett