LSE in talks to combine with Refinitiv: source

LONDON/NEW YORK (Reuters) – The London Stock Exchange Group Plc (LSE.L) is in talks to combine with Refinitiv, less than a year after buyout firm Blackstone Group Inc (BX.N) acquired a majority stake in the data analytics platform in a $20 billion deal, a person familiar with the matter said on Friday.

A deal could be agreed as early as next week, the source said. But the source added that details had not been finalized and negotiations could still fall apart. The deal structure and terms under discussion could not immediately be learned.

Professional information provider Thomson Reuters Corp (TRI.TO), the parent of Reuters News, owns a 45% stake in Refinitiv.

LSE and Thomson Reuters did not immediately respond to requests for comment. Blackstone declined to comment.

Refinitiv bonds rallied on the prospect of a deal.

Thomson Reuters shares hit a record high to end trading on Friday up 4.5% to C$92.74 in Toronto after the Financial Times first reported on the deal talks. The stock is up 62% since the end of January 2018, when Blackstone and Thomson Reuters announced the deal for Refinitiv.

A merger would significantly expand LSE’s information services business, which the bourse operator has been building as a more stable source of cash flow than its primary transaction-reliant businesses.

“The global exchanges are focusing more and more on data and technology as revenue drivers, and less on the actual matching of buys and sells,” said Kevin McPartland, head of market structure and technology research at Greenwich Associates.

LSE operates equity and derivatives markets such as the London Stock Exchange, Borsa Italiana, MTS and Turquoise. It is also the majority owner of LCH, which dominates euro swaps clearing. Its information services business includes financial indexing, benchmarking and analytics services.

The company has a market value of about 19.3 billion pounds ($23.9 billion) and net debt of about 1 billion pounds.

LSE Chief Executive David Schwimmer is a former Goldman Sachs Group Inc (GS.N) banker of 20 years who has raised expectations of big deals.

The LSE has failed several times to merge with rival Deutsche Boerse AG (DB1Gn.DE). Schwimmer was appointed CEO last August after the LSE’s most recent attempt to do a deal with Deutsche Boerse failed.

Buying Refinitiv could help soften the blow for LSE from a bout of market volatility that is expected should Britain leave the European Union by an Oct. 31 deadline without an exit deal.

Schwimmer said last month that LSE was “very prepared” for Brexit. The exchange has had to open an EU base in Amsterdam for Turquoise, its London-based pan-European share trading platform.

QUICK FLIP

London-based Refinitiv provides financial markets data and infrastructure to more than 40,000 clients in over 190 countries, according to its website.

It caters to traders and investment professionals who also use LSE’s exchanges. It is the biggest client for news of Reuters News under a 30-year contract.

Under Blackstone’s majority ownership, Refinitiv has been shedding non-core assets. In April, it launched an initial public offering of Tradeweb Markets Inc (TW.O), an electronic trading platform for bonds and derivative instruments.

It has also been in talks with Deutsche Boerse about selling its foreign exchange electronic trading platform FXall.

Private equity firms such as Blackstone aim to buy businesses so they can then subsequently sell them at a profit, typically between three and five years later.

A deal with London Stock Exchange for Refinitiv so soon after the carve-out from Thomson Reuters could prove to be a quick, profitable flip for Blackstone, which last week said its assets reached a record $545 billion.