PROPOSED ACQUISITION OF FRANK RUSSELL COMPANY AND FULLY UNDERWRITTEN RIGHTS ISSUE

NOT FOR PUBLICATION, RELEASE OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO ANY JURISDICTION IN WHICH IT WOULD BE UNLAWFUL TO DO SO. PLEASE SEE THE IMPORTANT NOTICE AT THE END OF THIS ANNOUNCEMENT.

THIS ANNOUNCEMENT IS AN ADVERTISEMENT AND DOES NOT CONSTITUTE A PROSPECTUS OR PROSPECTUS EQUIVALENT DOCUMENT. NOTHING HEREIN SHALL CONSTITUTE AN OFFERING OF NEW SHARES. NOTHING IN THIS ANNOUNCEMENT SHOULD BE INTERPRETED AS A TERM OR CONDITION OF THE RIGHTS ISSUE. ANY DECISION TO PURCHASE, SUBSCRIBE FOR, OTHERWISE ACQUIRE, SELL OR OTHERWISE DISPOSE OF ANY NEW SHARES MUST BE MADE ONLY ON THE BASIS OF THE INFORMATION CONTAINED IN AND INCORPORATED BY REFERENCE INTO THE PROSPECTUS ONCE PUBLISHED. COPIES OF THE PROSPECTUS WILL, FOLLOWING PUBLICATION, BE AVAILABLE FROM THE REGISTERED OFFICE OF LONDON STOCK EXCHANGE GROUP PLC AND ON ITS WEBSITE AT WWW.LSEG.COM.

Summary

  • London Stock Exchange Group plc announces the proposed acquisition of the entire issued share capital of Frank Russell Company from Northwestern Mutual and other minority shareholders of Russell for total cash consideration of US$2,700 million (£1,590 million)1
  • The Directors believe the Acquisition is a rare opportunity to acquire a high quality US business with a leading global brand providing index and investment management services
  • Combination of Russell’s index business with FTSE creates a global leader in index services and the No. 2 player in US-listed ETFs
  • Brings together US$5.2 trillion of assets benchmarked to Russell and an estimated US$4.0 trillion of equities benchmarked to FTSE
  • Further develops LSEG’s intellectual property portfolio
  • Accelerates LSEG’s diversification strategy and enhances its Information Services offering, particularly in the US
  • Allows LSEG to capitalise further on key industry trends such as strong growth in multi-asset solutions and passive investment strategies
  • Strengthens and deepens LSEG’s relationships with global clients and other stakeholders
  • Russell’s investment management business is one of the leading providers of multi-asset class investment solutions to institutional and retail investors worldwide
  • With US$256 billion2 AUM, the business is a highly regarded investment platform poised for continued growth in a large and growing market
  • The business utilises the integration of five distinct investment capabilities: portfolio construction, capital market insights, manager research, indices and portfolio implementation
  • Russell’s approach and capabilities are positioned to focus on outcome-orientated investment solutions
  • LSEG will undertake a comprehensive review of Russell’s investment management business to determine its positioning and fit with the Group
  • LSEG is committed to maintaining a clear focus on client service, fund performance and management and employee stability, whilst ensuring appropriate standalone governance
  • Russell’s President and Chief Executive Officer, Len Brennan, will join the Executive Committee of LSEG at Completion
  • Approximately US$1,600 million (£942 million)1 of the consideration will be financed from the net proceeds of the Rights Issue, with the remaining approximately US$1,100 million (£648 million)1 financed from existing and new LSEG bank debt facilities
  • The Directors expect the Acquisition will deliver highly attractive financial returns
  • Annual run-rate cost synergies of US$78 million (£46 million)1 by the end of year three, and annual run-rate revenue benefits of US$30 million (£18 million)1 and US$48 million (£28 million)1 by the end of years three and five, respectively
  • Earnings accretive in the first full year on an aggregate basis, with Russell’s index business accretive from year two on a standalone basis3,4
  • ROIC that meets LSEG’s hurdle rate in year three and exceeds it thereafter, on an aggregate and standalone index business basis3,4
  • Pro forma leverage is expected to be approximately 2.4x net debt to EBITDA as at Completion and is expected to reduce to 2.0x or below in the 12 months following Completion3,4
  • The Acquisition is classified under the Listing Rules as a Class 1 transaction and accordingly is conditional on the approval of Shareholders which is anticipated in September 2014
  • The Rights Issue is expected to be launched in September 2014, after the approval of the Acquisition by Shareholders

Commenting on the Acquisition, Xavier Rolet, Chief Executive of LSEG, said:

“The acquisition of Russell is another significant milestone for LSEG. It sits squarely with our diversification strategy, builds on one of our core strengths in intellectual property and provides another key driver of growth by growing our presence in the US, the largest global financial services market. Russell’s index management business is a strong strategic fit with FTSE. With this acquisition we are strongly positioned for the changing dynamics in the global indices market with a best in class offering, which we believe will help deliver outstanding returns for our shareholders. We will work with Len and his team to review the investment management business and determine its fit with the Group. This is a very high quality business with a track record of innovation and a world-class client and employee base, and we are committed to preserving the qualities that have attracted these clients and employees to the firm.”

Len Brennan, President and Chief Executive Officer of Russell, said:

“LSEG and Russell are two of the most highly respected financial services firms in the world, and this joining of the two organisations offers many strategic benefits. The combination of our index business with FTSE creates a truly global index leader, with a highly complementary fit of products and distribution capabilities and a unique position as a leader in major domestic market benchmarks as well as international equities. Russell’s investment management business has been a pioneer in innovation in the areas of passive management and smart beta and incorporating such strategies into our multi-asset solutions, and we are committed to maintaining the highest standards of client continuity and service.”

This summary should be read in conjunction with the full text of this announcement.


Conference call and webcast details

An analyst and investor call will be held at 9.00 a.m. (BST) today. Details of the call are as follows:

UK: 0800 694 0257
International: +44 (0)145 255 5566
Participants should ask to join the LSEG call - ID: 60043814

Participants will be able to access the presentation slides from 8:00 a.m. today by going to our website using the following link: http://www.lseg.com/investor-relations

A replay of the conference call will be available later this morning, after the conclusion of the call, available on the same section of our website as above.


Enquiries

London Stock Exchange Group plc

 

Gavin Sullivan (Media)

Paul Froud (Investors)

+44 20 7797 1222

+44 20 7797 3322

Barclays (Financial Adviser, Joint Sponsor)

 

Joel Fleck, Andrew Owens, Ahsan Raza

+44 20 7623 2323

Barclays (Corporate Broker)

 

Kunal Gandhi, Jimmy Bastock, Alisdair Gayne, Jim Renwick

+44 20 7623 2323

Greenhill (Financial Adviser, Joint Sponsor)

 

Robert Smith, David Wyles, Pieter-Jan Bouten

+44 20 7198 7400

Peter J. Solomon (Financial Adviser)

 

Ken Baronoff, John Sheldon, Jeff Jacobs

+1 212 508 1600

RBC Capital Markets (Corporate Broker to the Acquisition)

 

Josh Critchley, Oliver Hearsey

+44 20 7653 4000

Robey Warshaw (Financial Adviser)

 

Simon Robey

+44 20 7318 8889

RLM Finsbury

 

David Henderson, Sarah Heald

+44 20 7251 3801

IMPORTANT NOTICE

This announcement has been issued by and is the sole responsibility of LSEG.

This announcement is not a prospectus but an advertisement and investors should not acquire any Nil Paid Rights, Fully Paid Rights or New Shares referred to in this announcement except on the basis of the information contained in the Prospectus to be published by LSEG in connection with the Rights Issue. The information contained in this announcement is for background purposes only and does not purport to be full or complete. The information in this announcement is subject to change.

A copy of the Prospectus when published will be available from the registered office of LSEG and on LSEG's website at www.lseg.com provided that the Prospectus will not, subject to certain exceptions, be available (whether through the website or otherwise) to Shareholders in the United States or any other Excluded Territory.

Neither the content of LSEG's website nor any website accessible by hyperlinks on LSEG's website is incorporated in, or forms part of, this announcement. The Prospectus will give further details of the New Shares, the Nil Paid Rights and the Fully Paid Rights being offered pursuant to the Rights Issue.

This announcement is for information purposes only and is not intended to and does not constitute or form part of any offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, Nil Paid Rights, Fully Paid Rights or New Shares or to take up any entitlements to Nil Paid Rights in any jurisdiction. No offer or invitation to purchase or subscribe for, or any solicitation to purchase or subscribe for, Nil Paid Rights, Fully Paid Rights or New Shares or to take up any entitlements to Nil Paid Rights will be made in any jurisdiction in which such an offer or solicitation is unlawful. The information contained in this announcement is not for release, publication or distribution to persons in any Excluded Territory, and should not be distributed, forwarded to or transmitted in or into any jurisdiction, where to do so might constitute a violation of local securities laws or regulations.

The Nil Paid Rights, the Fully Paid Rights, the New Shares and the Provisional Allotment Letters have not been and will not be registered under the Securities Act or under any securities laws of any state or other jurisdiction of the United States and may not be offered, sold, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, within the United States except pursuant to an applicable exemption from or in a transaction not subject to the registration requirements of the Securities Act and in compliance with any applicable securities laws of any state or other jurisdiction of the United States. There will be no public offer of the Nil Paid Rights, the Fully Paid Rights or the New Shares in the United States.

The distribution of this announcement into jurisdictions other than the United Kingdom may be restricted by law, and, therefore, persons into whose possession this announcement comes should inform themselves about and observe any such restrictions. Any failure to comply with any such restrictions may constitute a violation of the securities laws of such jurisdiction. In particular, subject to certain exceptions, this announcement, the Prospectus (once published) and the Provisional Allotment Letters (once printed) should not be distributed, forwarded to or transmitted in or into the United States or any other Excluded Territory.

This announcement does not constitute a recommendation concerning any investor’s options with respect to the Rights Issue. The price and value of securities can go down as well as up. Past performance is not a guide to future performance. The contents of this announcement are not to be construed as legal, business, financial or tax advice. Each Shareholder or prospective investor should consult his, her or its own legal adviser, business adviser, financial adviser or tax adviser for legal, financial, business or tax advice.

Notice to all investors

Barclays is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Greenhill is authorised and regulated by the Financial Conduct Authority. RBC Capital Markets is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Barclays, Greenhill and RBC Capital Markets are acting for LSEG and are acting for no one else in connection with the Transaction and will not regard any other person as a client in relation to the Transaction and will not be responsible to anyone other than LSEG for providing the protections afforded to their respective clients, nor for providing advice in connection with the Transaction or any other matter, transaction or arrangement referred to herein.

Apart from the responsibilities and liabilities, if any, which may be imposed on Barclays and Greenhill in their capacities as Sponsors by the FSMA, none of Barclays, Greenhill and RBC Capital Markets accept any responsibility or liability whatsoever and make no representation or warranty, express or implied, for the contents of this announcement, including its accuracy, fairness, sufficiency, completeness or verification or for any other statement made or purported to be made by it, or on its behalf, in connection with LSEG or the Nil Paid Rights, Fully Paid Rights, Provisional Allotment Letters, New Shares or the Rights Issue and nothing in this announcement is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or future. Each of Barclays, Greenhill and RBC Capital Markets accordingly disclaim to the fullest extent permitted by law all and any responsibility and liability whether arising in tort, contract or otherwise (save as referred to above) which it might otherwise have in respect of this announcement or any such statement. Each of Barclays, Greenhill and RBC Capital Markets and/or their affiliates provide various investment banking, commercial banking and financial advisory services from time to time to LSEG.

No person has been authorised to give any information or to make any representations other than those contained in this announcement and, when published, the Prospectus and, if given or made, such information or representations must not be relied on as having been authorised by LSEG or Barclays, Greenhill and RBC Capital Markets. Subject to the Listing Rules, the Prospectus Rules and the Disclosure and Transparency Rules of the Financial Conduct Authority, the issue of this announcement shall not, in any circumstances, create any implication that there has been no change in the affairs of LSEG since the date of this announcement or that the information in it is correct as at any subsequent date.

Barclays and its respective affiliates, acting as investors for their own accounts, may, in accordance with applicable legal and regulatory provisions, engage in transactions in relation to the Nil Paid Rights, the Fully Paid Rights, the New Shares and/or related instruments for their own account for the purpose of hedging their underwriting exposure or otherwise. Accordingly, references in the Prospectus, once published, to the Nil Paid Rights, Fully Paid Rights or New Shares being issued, offered, subscribed, acquired, placed or otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by, Barclays and any of its respective affiliates acting as investors for their own accounts. Except as required by applicable law or regulation, Barclays does not propose to make any public disclosure in relation to such transactions.

Cautionary statement regarding forward-looking statements

This announcement may contain certain forward-looking statements, beliefs or opinions, with respect to the financial condition, results of operations and business of LSEG, Russell and the Enlarged Group.

These statements, which contain the words “anticipate”, “believe”, “intend”, “estimate”, “expect”, “may”, “will”, “seek”, “continue”, “aim”, “target”, “projected”, “plan”, “goal,” “achieve” and words of similar meaning, reflect the Company's beliefs and expectations and are based on numerous assumptions regarding the Company’s present and future business strategies and the environment the Company and the Enlarged Group will operate in and are subject to risks and uncertainties that may cause actual results to differ materially. No representation is made that any of these statements or forecasts will come to pass or that any forecast results will be achieved. Forward-looking statements involve inherent known and unknown risks, uncertainties and contingencies because they relate to events and depend on circumstances that may or may not occur in the future and may cause the actual results, performance or achievements of the Company or the Enlarged Group to be materially different from those expressed or implied by such forward looking statements. Many of these risks and uncertainties relate to factors that are beyond the Company's or the Enlarged Group’s ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of regulators and other factors such as the Company's or the Enlarged Group’s ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company or Russell operates or in economic or technological trends or conditions. Past performance of the Company or Russell cannot be relied on as a guide to future performance. As a result, you are cautioned not to place undue reliance on such forward-looking statements. The list above is not exhaustive and there are other factors that may cause the Company’s or the Enlarged Group’s actual results to differ materially from the forward-looking statements contained in this announcement Forward-looking statements speak only as of their date and the Company, its parent and subsidiary undertakings, the subsidiary undertakings of such parent undertakings, Barclays, Greenhill and RBC Capital Markets and any of such person’s respective directors, officers, employees, agents, affiliates or advisers expressly disclaim any obligation to supplement, amend, update or revise any of the forward-looking statements made herein, except where it would be required to do so under applicable law.

You are advised to read this announcement and, once published, the Prospectus in their entirety for a further discussion of the factors that could affect LSEG's future performance. In light of these risks, uncertainties and assumptions, the events described in the forward-looking statements in this announcement may not occur.

No statement in this announcement is intended as a profit forecast or a profit estimate and no statement in this announcement should be interpreted to mean that earnings per share of LSEG for the current or future financial years would necessarily match or exceed the historical published earnings per share of LSEG.