LSE rights issue to raise almost £1bn for US purchase

Xavier Rolet, chief executive of the London Stock Exchange Xavier Rolet, chief executive of the London Stock Exchange

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The London Stock Exchange is raising £938m ($1.55bn) from shareholders in a rights issue to help fund a £1.6bn acquisition.

The LSE said in late June it was buying index compiler and asset manager Frank Russell Company, from Northwestern Mutual.

The fully underwritten rights issue will be priced at £12.95 a share.

That is a 30.1% discount to Thursday's closing price of £20.05, which valued the LSE at £5.46bn.

News of the rights issue sent LSE shares down 1% to £19.86 in Friday morning trading.

The acquisition of Frank Russell - the largest in the LSE's history - gives the exchange ownership of the Russell 2000 small-cap US stock index.

It will also make it the third-largest player in the growing market for exchange-traded funds (ETFs).

Xavier Rolet, chief executive of LSE, said the deal would help to expand its global footprint, particularly in the key US market.

"This is a strong strategic acquisition for the group, which will accelerate development in one of our core strengths, intellectual property, and offers significant growth potential," he said.

Start Quote

We have seen a resurgence in the IPO market ”

End Quote Xavier Rolet London Stock Exchange chief executive

Shareholders must approve the deal at a general meeting on 10 September 10.

LSE also announced results for the three months to the end of June, which gave investors details of its latest financial performance in connection with the Frank Russell deal and rights issue.

Adjusted pre-tax profit rose 26% to £129.8m, with revenue up 20% to £299.9m.

Mr Rolet said: "We have seen a resurgence in the IPO market with an increase in both the number of companies joining our markets and the amount of money raised. While the summer period is seasonally slower, our diversified business is very well positioned for further growth."

Revenues from capital markets was up 16% as the number of new issues in primary markets more than doubled, while secondary markets benefitted from improvements in fixed income trading and Italian cash equity volumes.

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