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London Stock Exchange takes full control of FTSE

by Renee Cordes | Published December 12, 2011 at 10:47 AM

Putting more muscle behind its derivatives activities, London Stock Exchange Group plc agreed Monday, Dec. 12, to pay £450 million ($704.1 million) for the 50% of FTSE International Ltd. it does not own.

LSE is acquiring the stake from Pearson plc, the British publisher and owner of the Financial Times, as it looks to both bolster its listed derivatives business and expand into indices, data and analytics.

The move comes about a decade after London-based LSE failed in its attempted purchase of the London International Financial Futures and Options Exchange. The exchange, known as Liffe, is now a key asset of NYSE Euronext, which is battling to convince European Union regulators to approve its $9 billion tie-up with Deutsche Börse AG -- as well as a strong rival to LSE's derivatives arm.

Separately on Monday, an LSE spokesman confirmed that the company remains in exclusive discussions to acquire London-based clearinghouse LCH.Clearnet Group Ltd., with no new developments to report.

FTSE was founded as a joint venture between LSE and the Financial Times Group Ltd. in 1995. Today it ranks among the world's top three index providers by revenue and is the U.K. market leader, publishing that country's benchmark FTSE 100 index, among 200,000 other gauges, across a total of 80 countries.

"Fully aligning FTSE with one of the world's most liquid and most international trading groups is an exciting opportunity," Xavier Rolet, chief executive of LSE Group, said in a statement, adding: "This is a business we know well, and we expect that going forward our customers will benefit from greater choice, opportunity and innovation."

FTSE chief Mark Makepeace, who will stay on in that role, added that "together with LSEG, we will fully focus on geographical and product driven expansion."

The LSE plans to fund the purchase, due to be completed in the first quarter of 2012, from surplus cash and existing bank facilities. It said it has also secured commitments for new facilities of £350 million.

For Pearson, the sale represents a further step in its shift away from data, coming a year after it sold its 62% stake in Interactive Data Corp. last year to U.S. private equity firms Silver Lake and Warburg Pincus for $3.4 billion.

Pearson said it plans to use the proceeds to invest in its business organically and through acquisitions of companies "with complementary content, technology and geographic exposure."

The company projects about £18 million in post-tax contribution to adjusted earnings this year.

A Morgan Stanley team including Simon Robey, Matthew Jarman and Max Mesny is providing financial advice and corporate brokerage services to LSE. Barclays Capital is also acting as a corporate broker.

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