London Stock Exchange could buy Russell Investments in $3 billion deal

The London Stock Exchange (LSE) could be set to buy Russell Investments in a deal worth as much as $3 billion – the biggest in the exchange’s history.

Few entities have had as much significance in global finance as LSE, which has played a central role in money markets for more than two centuries. But today it has announced its intentions to stay at the forefront of global finance, after entering into $3 billion talks to acquire Russell Investments.

The London Stock Exchange Group’s statement is short and concise, explaining that talks are still in full swing and it is not yet certain a deal will be made. But with the Guardian reporting the deal could be worth around $3 billion (£1.78 billion), it appears the exchange could be headed for the biggest acquisition in its 213-year history.

Russell is well established in the world of finance as an asset manager and index compiler, best-known for benchmarks like the Russell 2000 in the US. Indeed, Reuters says that some $5.2 trillion in assets is currently benchmarked to its indices. LSE taking the bold move of acquiring the company would represent a concerted effort to break into the US – and it could even merge Russell with FTSE International, which it owns outright.

LSE entered late-stage talks after it emerged that Northwestern Mutual was spinning Russell off at auction, with securities index firm MSCI and Canadian Imperial Bank of Commerce both among the reported suitors. Last week LSE did confirm that it was talking to Northwestern about the possibilities, while the Wall Street Journal reported all three firms has put in offers for the whole of the Russell business.

Private equity groups have also been involved, but it appears that the ongoing race between exchanges and data companies to secure access to the best data compilers has pushed them out.

The Financial Times explains that investors are increasingly interested in index-based products, analytics and “value-added data”, meaning that companies providing the most valuable data are strategic targets for businesses in the finance sector. LSE would be able to compete with the likes of MSCI and other indexing companies with Russell’s expertise at its disposal.