THE LONDON Stock Exchange is buying British publisher Pearsons 50 per cent stake in FTSE International for £450 million to take full control of the index firm and ramp up its derivatives business.
The LSE, which already owns half of FTSE, has ambitions to challenge Europes top futures exchanges, NYSE Euronexts and Deutsche Börses Eurex.
Crucially, it is an excellent fit for our growing derivatives operations and will help us develop new tradeable products, David Lester, director of information services at the LSE and chairman of FTSE International, said yesterday.
The LSE said the deal, which it hopes to close in the first quarter of next year, will be funded from existing resources, although it has commitments from banks for £350 million in additional debt for more “full financial flexibility”.
The transaction is central to the LSEs push into listed derivatives trading which began in June when it started offering a FTSE 100 futures via its electronic platform Turquoise in a direct challenge to NYSE Euronexts Liffe.
The deal also strengthens the LSEs links with asset managers, which use FTSE indices for benchmarking their funds’ performance, whereas the LSE has traditionally had stronger ties with banks and brokers.
Analysts said Pearson, which owns the Financial Times newspaper, Penguin Books and a large education unit, had secured a decent premium for a business that was no longer core to its central strategy.
“It’s a good price from Pearson’s point of view and it continues the process of them rationalising their non-core assets,” Panmure Gordon analyst Alex DeGroote told Reuters.
“People in the market will likely make the follow-on observation that the FT looks a more plausible sale candidate now than before but I’d make the point that there’s absolutely no need for them to sell it in a hurry,” he added.
Shares in Pearson were flat at 1310 GMT, while LSE shares were down 4.5 per cent and the FTSE 100 Index down 0.7 per cent.
The acquisition is the latest move by LSE chief executive Xavier Rolet to take tighter control of the various business units that the LSE relies on to offer its trading, clearing, data and technology services. – (Reuters)
