London Stock Exchange Group PLC confirmed it is in “exclusive discussions” to acquire Russell Investments from Northwestern Mutual Life Insurance Co., according to an announcement Tuesday from LSEG.
A spokeswoman for LSEG declined to comment beyond the announcement relating to press speculation linking the firms and a potential acquisition. The announcement said discussions are ongoing and “there can be no certainty that a transaction will be forthcoming.”
Last week, the stock exchange announced it was in talks to acquire the money manager and index provider that has $259.7 billion in assets under management.
Analysts have speculated that any deal would be to bolster LSEG's U.S. presence in the field of index provision. They said any deal is expected to be around $3 billion.
In a note Tuesday from Numis Securities, analyst James Hamilton wrote: “A deal at that size would be the biggest in the LSE's 213-year history and mark its boldest push into the U.S where Russell is best known for its equity benchmarks such as the Russell 2000. … Should the LSE acquire the index businesses of Russell it would plug the strategic gap in the FTSE portfolio.”
LSEG already owns index provider FTSE Group.
Russell's U.S. indexes have $5.2 trillion of assets benchmarked to them, according to its website.
Peter Lenardos, an analyst at RBC Capital Markets, reiterated in a note Monday that a deal to acquire Russell “would allow LSEG/FTSE to compete more effectively with MSCI.”
However, uncertainty remains over LSEG's interest in acquiring a money manager. “We do not see the strategic logic of purchasing the asset management business of Russell and would need to be convinced,” Mr. Hamilton wrote.
Another source in the money management industry, who asked not to be named, said: “I don't think they do want (the money management business; any deal) is very much for the index business. But there is more we don't know about the deal than we do know. It is far from a sure thing. But it makes strategic sense and financial sense. There is the possibility that they acquire the whole business but immediately sell part of it — that could be a very smooth structure. There would be a buyer for the asset manager — that would be the easy bit to sell.”
