UPDATE 2-UK's LSE enters exclusive talks to acquire Russell Investments

Tue May 20, 2014 1:18pm EDT
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(Recasts, adds detail, background, Northwestern Mutual comment, analyst comment)

By Pamela Barbaglia, Clare Hutchison and Anjuli Davies

May 20 (Reuters) - London Stock Exchange Group Plc has entered exclusive talks to buy U.S.-based asset manager and stock index provider Russell Investments, in an estimated $3 billion deal that would allow the bourse operator to increase its U.S. presence.

The move fits with LSE Chief Executive Xavier Rolet's strategy to diversify the business, moving into growth areas such as market data and post-trade services to offset lower trading volumes in an uncertain economic climate and increased regulation.

The British group had said last week it was in talks on the possible purchase of Seattle-based Russell and its latest statement shows it had beaten off possible rival bidders.

A source familiar with the talks said on Tuesday the LSE's interest lies in Russell's index business, which owns the Russell Global Index series for stocks which is popular with U.S. traders and investors.

The LSE did not say if it intended to sell Russell's investment management arm, which has some $260 billion in assets under management.

The LSE has already expanded in indexes with the 2011 purchase from Pearson Plc of the 50 percent it did not already own in index provider FTSE International, manager of the FTSE 100 index of blue-chip British stocks.   Continued...