Russell Investments' asset management and consulting businesses will most likely be sold by the London Stock Exchange Group PLC, which is purchasing the entire firm for $2.7 billion, sources say.
The price tag for those business lines could be between $700 million and $1 billion, the sources estimate.
Most agree Russell's indexing arm is the plum sought by the LSE Group. Russell first introduced its indexes in 1984. The firm, which was originally formed in 1936, began investment consulting in 1969 and managing money in 1980. Russell, Seattle, is owned by Northwestern Mutual Life Insurance Co., which bought the firm in 1999.
“Without a doubt, the legacy business will be spun out of the London Stock Exchange,” said Donald Putnam, a San Francisco-based managing partner of investment bank Grail Partners. “They had to buy the bath water with the baby. They had to do a single deal and separate the companies later.”
Mr. Putnam said Russell's core money management and consulting businesses are “not compatible with the indexing business,” because the primary purpose of an exchange is to have a “neutral venue for transacting.”
Jeffrey MacLean, Los Angeles-based CEO at Wurts & Associates, agreed: “The people I've talked to think that the stock exchange won't have any use for the asset management and consultant divisions.”
Mr. Putnam also said he believed the two businesses would be sold as a single unit and could fetch up to $1 billion.
Who is most likely to step up for the sale and what will they do with the businesses? “Those are difficult questions that I don't know the answer to,” Mr. MacLean said. “There's speculation as to whether the asset management and consultant divisions will be spun off as one unit or sold in pieces.”
LSE spokesman Tom Gilbert said the stock exchange group will conduct a review of Russell's $256 billion investment management and consulting divisions to see how they fit with the overall organization. That review is expected after the deal's completion at the end of 2014 or beginning of 2015. He declined to provide additional details.
Russell spokesman Tim Benedict referred inquiries to the LSE.