Despite a Hong Kong takeover offer conditional upon ending its pursuit of Refinitiv, the London Stock Exchange remains committed to the US data provider
A Hong Kong takeover bid may have clouded the picture in recent weeks, but the London Stock Exchange Group (LSEG) for now seems committed to its planned acquisition of Refinitiv.
The proposed £21bn ($26bn) takeover of the US financial data provider was confirmed earlier this year by the London bourse, as it seeks to strengthen its global position in a data-driven world.
But earlier this month, the deal was called into question when an offer by Hong Kong Exchanges and Clearing (HKEX) was tabled to acquire LSEG, conditional upon it ditching its acquisition plans for Refinitiv.
LSEG has since rebuffed the £32bn offer from its Hong Kong counterpart, and restated its commitment to the Refinitiv deal — although HKEX boss Charles Li has not yet given up his pursuit of an agreement.
Speaking at Sibos 2019 this week, LSEG CEO David Schwimmer went into detail on why Refinitiv was targeted, and how he expects the data provider to enhance the bourse’s future operations.
Refinitiv deal will position the London Stock Exchange to improve its trading of FX and fixed income assets
Like most other areas of financial services, the traditional ways of stock trading have changed significantly in recent years, as technology continues to work its way into every aspect of the industry.
Schwimmer said: “We’ve been looking closely at a couple of key trends, drivers of change.
“One is the increasing importance of data and data analytics. Another is multi-asset class trading. A third is that the industry is pushing towards being a global business.
“The Refinitiv transaction positions us to take advantage of those trends very well across our businesses.”
LSEG has identified two key asset classes in modern-day trading in which it wants to improve its current offering, and Schwimmer believes acquiring Refinitiv will help it do this.
The US data firm’s ownership of FXall, a foreign exchange execution menu, will give LSEG a significant slice of the market for the world’s most traded asset class, while its controlling stake in Tradeweb, a fixed-income trading platform, will strengthen its position for the second-highest traded asset class.
Schwimmer said: “The positioning Refinitiv gives us in the capital markets space — in FX where we currently have no presence, and in fixed-income where we have limited presence — is a very attractive and important part of the transaction.
“There’s a misperception out there that Refinitiv is a business based on icon terminals.
“It’s a part of the company that people perhaps have the most interaction with, but Refinitiv has a much broader business — and that’s what is attractive to us.”
London Stock Exchange will use Refinitiv data to enhance its own index products
As well as helping it to enter new trading markets, the London Stock Exchange boss also pointed to ways Refinitiv’s data might enhance its existing propositions.
He said: “The driver of the Refinitiv transaction is not about creating market power for data or data distribution.
There are very attractive synergies across both the capital markets business, and the data business, but when I’m talking about the data business, I’m not talking about market data,”
“For example, Refinitiv has a very attractive data set around environmental, social and corporate governance (ESG).
“Within our information services and index businesses we have a substantial business with ESG products, and the notion that we can use Refinitiv data to enhance our index products is a very attractive synergy.”
London Stock Exchange boss says Refinitiv deal will globalise the group
HKEX has touted its own takeover proposal as a way to create a combined entity that will “connect East and West” and exploit the lucrative potential of the Chinese investment market, but Schwimmer downplayed this opportunity – saying Refinitiv’s existing global presence will prove valuable enough to the London bourse.
“The Refinitiv deal truly globalises the LSEG,” he said.
“We are a global business today — 700 people in the US, more than 1,000 in Asia — but much of our business is focused on Europe.
“Refinitiv will make us truly diversified across the Americas and Asia — as well as serving clients in China.”