LSE to buy Citi's bond analysis and indices business for $685 mn in cash

Continued growth development of LSE Group's Information Services Division: CEO, Mark Makepeace

London Stock Exchange (LSE) has agreed to buy The Yield Book, Citigroup's fixed-income analytics service and also its related indexing business, for $685 million in cash, the companies said on Tuesday.

LSE, which had said it would be looking out for investments after the collapse of its proposed merger with Deutsche Boerse, said the deal would boost the data and analytics capabilities of its information and FTSE Russell indexes business and take assets under management using its indexes to about $15 trillion.

The deal, which is subject to regulatory clearances and is expected to close in the second half of this year, is expected to add $30 million in synergy benefits to LSE's revenues over the first three years after completion and bring $18 million in cost savings over the same period, the company said.

Last year it estimated the business being acquired would have generated earnings before interest, tax, depreciation and amortisation of $46 million on revenue of $107 million.

LSE, which bought stock index provider and asset manager Russell Investments in 2014, expects the EBITDA margin to rise to at least 50 percent within three years of the deal's completion, the company said.

"The acquisition of The Yield Book and Citi Fixed Income Indices supports the continued strong growth and development of London Stock Exchange Group's Information Services division," said Mark Makepeace, CEO of FTSE Russell.

The Yield Book and Citi Fixed Income Indices have a client base of more than 350 institutions offering services used to analyse fixed income instruments including mortgage, government, corporate and derivative securities, Citi said.

Citi Fixed Income Indices includes the World Government Bond Index.

"This represents a very sensible deal as it helps LSEG grow its highly attractive info services division and will allow it to capitalise further on key industry trends including strong growth in multi-asset solutions and passive investment strategies," said Numis analysts, who rate LSE as "hold".

Citi was advised on the deal by its Institutional Clients Group. Skadden, Arps, Slate, Meagher & Flom LLP served as legal advisor to Citi.

Barclays acted as financial adviser to LSE, while Freshfields Bruckhaus Deringer LLP was counsel.

The deal announced two months after EU regulators blocked LSE's planned merger with Deutsche Boerse, citing concerns over a potential monopoly in the processing of bond trades, will be funded from existing cash resources and credit facilities, the LSE said.

Shares in LSE, which have risen 12 percent since that merger was blocked, were up 0.2 percent at 3,398 pence at 0814 GMT.