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Consensus beating results refocus attention on the strategic benefits of the Refinitiv acquisition

Shares in London Stock Exchange Group (LSEG), have fallen 20% since March, on concerns surrounding integration costs associated with the group’s $27 billion acquisition of data provider Refinitiv.

However, recent interim results (6 Aug) should allay these fears as they demonstrated a sharp increase in pre-tax profits.

Moving forward, these consensus-beating results are likely to act as a watershed moment.

The Refinitiv acquisition redefines the wider business in three respects. First, it enhances exposure to higher margin subscription based revenues.

Second, it secures the firm’s position in the critical growth markets of Asia and America.

Third, it creates the opportunity for it to re-rate as a data company. While not optically that cheap on a 2022 price to earnings ratio of 25 times (using consensus data from Refinitiv) pure data companies like Factest and MSCI, have historically traded on higher valuations than exchanges.


First half pre-tax profit rose to £510 million, an increase from £262 million in the prior year.

The group announced cost synergies ahead of plan, and increased its forecast for cost savings associated with the Refinitiv deal from £88 million to £125 million.

According to Credit Suisse the market will take comfort from estimated cost growth in the ‘low single digits’ for 2022 and 2023.

The myopic nature of recent commentary surrounding the costs associated with the Refinitiv acquisition has distracted investors from the key strategic benefits that it brings to the company.

The deal enhances its geographical scale and scope, specifically in the key markets of Asia and America. In the former, where it emplys 10,000 people Refinitiv has deep relationships in the corporate market, as well as the asset management and analyst communities.

This cements London Stock Exchange Group’s position in
the world’s fastest growing financial markets.

The combination of Refinitiv’s foreign exchange and fixed income venues with London Stock Exchange Group’s equities, ETF and derivatives businesses will undoubtedly foster innovation and new product offerings.

On a five-year basis, savings from the Refinitiv are expected to reach £350 million, equivalent to 11% of the group’s current operating expenses.


The attempt by HKEX (Hong Kong Exchanges and Clearing) in September 2019, to acquire London Stock Exchange Group for $39 billion reflects the unique nature of its market infrastructure and data assets.

In essence this is a trophy asset, meaning it benefits from incumbency, high barriers to entry and a dominant local market position. From an investor perspective this trophy asset premium is likely to act as a support for the share price.

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