London Stock Exchange buys asset manager for US$2.7b

The London Stock Exchange (LSE) unveiled the largest acquisition in its history yesterday, snapping up US group Frank Russell for US$2.7 billion to boost its position in the world's largest financial services market and sending its shares surging.

Europe's oldest independent bourse said it would fund the long-awaited acquisition of the index provider and asset manager, which analysts have described as strategically sound, with a US$1.6 billion rights issue and debt.

It said the deal, which catapults it into third position in the booming market for exchange traded funds (ETFs) behind global market leaders S&P Dow Jones and MSCI, would boost earnings in the first full year.

The acquisition, which requires approval from regulators and shareholders, would also create a powerful index compiler with around US$9.2 trillion of benchmarked assets.

"With this acquisition, we are strongly positioned for the changing dynamics in the global indices market with a best in class offering, which we believe will help deliver outstanding returns for our shareholders," LSE chief executive Xavier Rolet said.

The deal gives the London bourse a market share of around 13 per cent in the booming ETF market - passive and low-cost funds that provide an alternative to active fund management.