LSE's $2.8bn deal to buy Russell nears agreement

The London Stock Exchange Group is close to buying Russell Investments, the index compiler and asset manager, in a deal worth about $2.8bn that would substantially increase the UK group's American operations.

The two sides, which entered exclusive talks last month, have reached a tentative agreement on the price and structure of the deal and are planning to announce the agreement later this month, said people familiar with the situation.

The talks are continuing and exact terms over the mix of debt and equity used to fund the deal have not been decided, said one person close to the discussions. Another cautioned that, while advanced, the talks could still fall apart and no deal was certain.

But a deal of that size, if agreed, would be the biggest in the LSE's 213-year history and mark its boldest push into the US where Russell is best known for its equity benchmarks such as the Russell 2000.

Owning the Russell index and its affiliated products would be a transformational leap for the LSE. It would be part of a bold push into the US market where the Russell name is prominent among traders and fund managers.

A purchase would also allow the exchange to unite the index business with FTSE International, which it owns outright after purchasing the 50 per cent it did not own from Pearson, the parent company of the Financial Times, for £450m in 2011.

Russell's business also comprises consulting and asset management, with about $260bn in assets under management.

The combination would allow the LSE to take on leaders in the indexing business - MSCI and S&P Dow Jones Indices - in a sector that has also seen Nasdaq OMX, Markit and Bloomberg further their interest and ambitions in recent years.

The LSE's move is the latest indication of how rival exchanges and financial data companies have sought to tighten their grip on market data compilers, as fund managers demand more index-based products, value-added data and analytical tools.

LSE declined to comment. Russell did not immediately respond to a request for comment.

Additional reporting by Philip Stafford in London

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