LSE unveils $1.6 billion rights issue
London, August 23, 2014
The London Stock Exchange (LSE) Group yesterday said it would raise Â£938 million ($1.6 billion) in its first rights issue to part fund the acquisition of US indexes group Frank Russell.
LSE will offer 74,347,813 new shares at a price of 1,295 pence, a 30.1 per cent discount to Thursday's closing price. Shareholders will have the right to buy three new shares for every 11 already held.
The new ordinary shares represent 27.3 per cent of the existing share capital and would be 21.4 per cent of the enlarged issued share capital, following the rights issue.
Europe's oldest independent bourse unveiled plans to buy Frank Russell for $2.7 billion in June to move deeper into the US financial services market, where half of global assets under management are based.
The deal would give LSE, which owns indexing business FTSE, third place in the booming market for exchange traded funds, low-cost funds that provide an alternative to active fund management, behind market leaders S&P Dow Jones and MSCI .
The discount is at the lower end of the typical 30 to 40 per cent range seen in similar recent UK deals, such as defence firm Babcock's $1.8 billion rights issue. Its shares were offered at a 34.5 per cent discount, according to data compiled by Barclays.
LSE chief financial officer David Warren said the size of the discount showed there was strong support for the Russell deal. 'We have been in close contact with our major shareholders since the time of the transition announcement in late June and at various intervals since, and there has been positive reception to the acquisition.'
The rights issue has been fully underwritten by Barclays, RBC Capital Markets, Deutsche Bank, JP Morgan Cazenove, Banca IMI, Banco Santander, HSBC and Mitsubishi UFJ Securities.
LSE will pay the remaining $1.1 billion for Frank Russell with its existing multi-currency bank debt facilities.
The deal, which is expected to boost earnings in the first full year after the merger, will create an index compiler with some $9.2 trillion of assets benchmarked against the performance of its market measures, which include the UK's FTSE 100.-Reuters