LSE buys FTSE to win control of key assets

THE London Stock Exchange took total control of stock index provider FTSE International yesterday, by buying Pearson’s 50 per cent stake for £450m.

The move cements the LSE’s hold over the FTSE’s 200,000 indices and global, high growth trajectory. It also puts it in control of a critical piece of trading infrastructure as it seeks to grow its derivatives and clearing capabilities to compete better against rivals in Europe and the US.

The LSE is currently also in the process of buying clearing house LCH.Clearnet.

Pearson said the disposal of its half of FTSE was in line with its strategy to sell out of financial data businesses and grow its presence in news and analysis instead.

David Lester, the LSE’s director of information services, said the deal was part of the group’s diversification away from pure equities trading and would allow the group to create new benchmarks and tradeable derivatives products.

“In our view it is a very high growth and high quality asset,” he told City A.M. “It grew at 30 per cent in 2010 and this year we expect it to grow at beyond 31 per cent.”

He said FTSE’s growth into global markets was of huge value and the LSE would continue to invest in new indices and data services worldwide.

The LSE will finance the takeover from £100m of cash and £350m of bank facilities, taking its leverage ratio from 1x to 1.6x.

ADVISERS: MORGAN STANLEY

SIMON ROBEY

UK CHIEF EXECUTIVE

SIMON Robey, Morgan Stanley’s UK chief executive and co-chair of M&A, advised the London Stock Exchange on this latest deal.

The LSE is just one of Robey’s star clients, but he has experienced a tough year for dealmaking as political issues have transpired to prevent transactions going ahead. He led the advisory work on the LSE’s ill-fated bid for Canadian rival TMX this year, but the LSE was forced to walk away after TMX’s Canadian shareholders blocked the deal. Robey also saw BSkyB’s potential takeover by News Corp abandoned after the phone hacking scandal at the News of the World, while his advice to BP on its last-ditch efforts to save its Arctic tie-up with Rosneft foundered on tensions with TNK-BP.

Robey is known as a star at Morgan Stanley, however, and over the years he has acted for UK chocolate maker Cadbury in its £11.5bn sale to US rival Kraft last January, and on Santander’s purchase of Abbey National in 2004.

Robey was a choral scholar at Magdalen College, Oxford. He is the chairman of the Royal Opera House and has held a season ticket at Arsenal for more than 20 years.