The London Stock Exchange has confirmed that it is in talks to acquire Refinitiv for $27 billion, including debt, in a seismic deal that would create a U.K. data and trading giant.

The London Stock Exchange (ticker: LSE.UK), which is valued at £19.7 billion by market capitalization, said on Saturday that it was in discussions with the owners of Refinitiv to buy the data company. A consortium led by the private-equity giant the Blackstone Group (BX) owns 55% of Refinitiv, with Thomson Reuters (TRI) holding the rest.

A tie-up between the two companies, which was first reported by the Financial Times, would create the largest listed global financial markets infrastructure provider by revenue. A City M&A banker called it a “blockbuster” deal.

The talks come at a time at critical time for London with the capital’s role as a global financial center under question as the U.K. prepares to withdraw from the European Union. The London exchange said the combined company would have its headquarters in the U.K.

Together, the companies would have generated revenues of more than £6 billion last year. The LSE says it believes it could achieve annual cost-savings in excess of £350 million in the five years after completing a deal. The stock exchange, however, cautioned that there was no certainty of a deal. ed potential for innovation, is driving customer demand for sophisticated data content and analytics provided on flexible and open platforms.

The stock exchange said: “The digital transformation of the financial markets infrastructure landscape, together with the increased potential for innovation, is driving customer demand for sophisticated data content and analytics provided on flexible and open platforms.

“Against this backdrop, the board has conviction that a leading financial markets infrastructure provider must operate globally and across asset classes.”

Refinitiv shareholders would own 37% of the combined group but less than 30% of the voting rights. The LSE said it would issue new shares to pay for the equity component of its target acquisition.  The LSE’s chief executive, David Schwimmer, who has a background as a mergers and acquisitions banker at Goldman Sachs (GS), Chairman Don Robert, and the finance chief, David Warren, would continue to lead the combined company. No mention was made in the press statement regarding Refinitiv CEO David Craig.

Discussions about board membership, governance and agreements, such as shareholder lockups, are at an “advanced” stage, the LSE said.  The merger would take the LSE, one of the City’s most iconic institutions, further beyond its roots in listings and cash equities trading. Acquiring Refinitiv in its entirety would give the LSE a strong position in bond and currency trading.

Refinitiv is the former financial and risk business of Thomson Reuters. It was valued at $20 billion, including debt, when a consortium led by private equity company Blackstone bought a majority stake in it in 2018. Blackstone was contacted for comment.

Since replacing former LSE CEO Xavier Rolet in August 2018, Schwimmer has repeatedly said that acquisitions form part of his plans to grow the exchange. Yet he has also noted the difficulty of merging with rival exchanges in the current political and regulatory environment. The LSE and German rival Deutsche Börse (DB1. Germany) saw an attempt to merge fall apart in March 2017 after antitrust regulators blocked the deal.  One former LSE executive said a deal with Refinitiv would be a “fundamental change” for the exchange, propelling it deeper into the data business. Robert, who became chairman of the LSE in May this year, has a background in technology, data, and analytics, having been chairman and CEO of Experian(EXPN.UK).

Refinitiv owns a majority interest in fixed-income and derivatives trading platform Tradeweb Markets (TW), where more than $753.8bn exchanged hands every day on average in the second quarter of this year. Tradeweb went public in April, and its stock price has surged since.  Refinitiv also owns the Elektron data platform, the Eikon terminals business, and a foreign-exchange trading arm with average daily trading volume of more than $400 billion.

The LSE said any deal would require approval from shareholders, antitrust authorities and regulators.


Note:  Blackstone Group acquired 55% of Thomson Reuters in 2018 for US$17 billion