The London Stock Exchange is buying British publisher Pearson's 50 percent stake in FTSE International for 450 million pounds ($703 million) to take full control of the index firm and ramp up its derivatives business. The LSE, which already owns half of FTSE, has ambitions to challenge Europe's top futures exchanges, NYSE Euronext's and Deutsche Boerse's Eurex.
"Crucially, it is an excellent fit for our growing derivatives operations and will help us develop new tradeable products," David Lester, director of information services at the LSE and Chairman of FTSE International, said on Monday. The LSE said the deal, which it hopes to close in the first quarter of next year, will be funded from existing resources, although it has commitments from banks for 350 million pounds in additional debt for more "full financial flexibility".
The transaction is central to the LSE's push into listed derivatives trading which began in June when it started offering a FTSE 100 futures via its electronic platform Turquoise in a direct challenge to NYSE Euronext's Liffe. The deal also strengthens the LSE's links with asset managers, which use FTSE indices for benchmarking their funds' performance, whereas the LSE has traditionally had stronger ties with banks and brokers.
Analysts said Pearson, which owns the Financial Times newspaper, Penguin Books and a large education unit, had secured a decent premium for a business that was no longer core to its central strategy. "It's a good price from Pearson's point of view and it continues the process of them rationalising their non-core assets," Panmure Gordon analyst Alex DeGroote told Reuters.