LSE receives green light to buy data giant Refinitiv for US $ 27 billion

The authorization from the European Union was the last major obstacle to a transaction that will create a powerhouse in the financial data industry.

The London Stock Exchange Group (LSEG) purchase of Refinitiv for US $ 27 billion was approved by European Union regulators, overcoming the last major hurdle to creating a financial data powerhouse.

The LSE made “commitments that will ensure that markets remain open and competitive and that the purchase will not lead to higher prices or fewer options and innovation,” the European Commission said Wednesday.

Obtaining EU approval ensures a transformative deal for The 300-year-old London Stock Exchange, with a global scale as companies compete to meet the growing demand for data and analytics in increasingly computerized financial markets. The news is also a boost for one of London’s flagship financial companies, as the post-Brexit era begins to affect the sector’s role on the world stage.

In a statement, LSE said the transaction still requires a “small amount” of regulatory approvals and would be completed in the first quarter. Its shares rose 1.9% at 1:20 p.m. in London.

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Divestments and guarantees

LSE will sell Borsa Italiana, including its MTS European government bond trading platform, Euronext and two Italian banks. The EU said this removes the overlap with Refinitiv’s activities in e-bond trading.

LSE has also committed to continue to offer OTC interest rate derivative clearing services through LCH Swapclear on an open access basis for ten years. This will keep you subject to EU regulations on transparent and non-discriminatory compensation despite the UK’s decision to leave the EU.

The company undertakes not to discriminate between Tradeweb and other trading venues and middleware providers. It will also provide access to LSE Headquarters data, FTSE UK Equity Indices and WM / R Currency Benchmark Indices to all competitors existing and future later.

He vowed not to degrade technology anymore maintain an information barrier between LSE clients and some Refinitiv companies to avoid a negative impact on other providers. These commitments also have a duration of ten years.

New container

The post-merger company will combine the trading of stocks, debt and swaps and LSE derivatives compensation with data and indexing businesses that will compete with companies ranging from MSCI to Bloomberg. The parent company of Bloomberg News competes with Refinitiv to provide news, data and financial information.

The transaction also helped drive consolidation among the financial industry’s largest data providers. In November, S&P Global agreed to buy IHS Markit for about $ 39 billion. That same month, LSE’s biggest European rival, Deutsche Boerse, bought a majority stake in Institutional Shareholder Services, the corporate governance advisor.

The Refinitiv deal has come under a lot of scrutiny. Regulators pointed to potential problems with the company’s combined market share in European government bond trading, interest rate derivatives trading and clearing, real-time data feeds and index licenses, citing the possibility that historical LSE rivals could be excluded from access to significant Refinitiv bonuses.

Failed precedents

EU Competition Commissioner Margrethe Vestager also raised concerns about the way some companies accumulate data.

If the agreement is finally finalized would mark a turnaround after a series of failed transactions involving major stock exchanges. In 2017, a plan to combine LSE and Deutsche Boerse was aimed at creating a European champion that could compete with the largest US exchanges, but was vetoed by European regulators for lessening competition.

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