London Stock Exchange Group Plc · LSE:LSEG
London Stock Exchange — Merger or Acquisition (June 2014)
24 slides from London Stock Exchange's merger presentation, Jun 26, 2014
Slide 1: Acquisition of Frank Russell Company
CONFIDENTIAL London Stock Exchange Group plc Acquisition of Frank Russell Company Strategic acquisition with significant growth potential 26 June 2014
Slide 2: Disclaimer
CONFIDENTIAL Disclaimer THIS PRESENTATION IS NOT FOR PUBLIC RELEASE or for release, publication or distribution (in whole or in part) in, into or from the US, Australia, Canada, Japan or any jurisdiction where to do so would constitute a violation of the relevant laws of such jurisdiction. This pres
Slide 3: Clear strategic rationale
CONFIDENTIAL Clear strategic rationale The $2.7 billion acquisition of Frank Russell Company (“Russell”) comprises Russell Indexes (“Index”) and Russell Investment Management (“IM”) Rare opportunity to acquire a highly regarded, premium business with an established U.S. market position Leading U.S
Slide 4: Transaction highlights
CONFIDENTIAL Transaction highlights 100% of Russell to be acquired for $2,700 million (£1,590 million)(1)(2) in cash paid to The Northwestern Mutual Life Insurance Consideration Company and other minority shareholders Highly attractive financial returns on an aggregate and standalone basis EPS
Slide 5: Investment Management business
CONFIDENTIAL Investment Management business Global Investment Management business poised for continued strong and attractive growth Large and growing end-market Well positioned for industry trends towards multi-asset class solutions Highly recurring revenue model World class brand Experien
Slide 6: Overview of Russell
CONFIDENTIAL Overview of Russell Page 6
Slide 7: Overview of Russell
CONFIDENTIAL Overview of Russell High quality Index and Investment Management businesses Russell's Business Divisions Business Description Subscription-based data licensing fees (generally Index recurring fixed dollar contracts) Payments from 3rd party ETFs / passive funds benchmarked to Russell
Slide 8: Overview of Index business
CONFIDENTIAL Overview of Index business #1 for U.S. focused equity funds Historical Revenue by Product and EBITDA Margin(2) U.S. Leader with Strong relationships with leading asset Strong Brand managers and exchanges ($ millions) 92% of retail advisors with 10+ years of $220 49% 49% 50% experi
Slide 9: Overview of Index business (cont'd)
CONFIDENTIAL Overview of Index business (cont’d) Business Description U.S. Institutional Index Provider of Choice 73% of U.S. institutional equity portfolios by AUM are benchmarked to Russell share of U.S. institutional equity AUM Index including: – 98% of small-cap and style-specific equity AUM –
Slide 10: Overview of Investment Management business
CONFIDENTIAL Overview of Investment Management business IM comprises two main sub-units Investment Management Division Russell Implementation Services (RIS) Global asset manager with $181bn(1) AUM focused on outcome Dually registered as both an investment advisor with fiduciary oriented investin
Slide 11: Strong benefits from a combination
CONFIDENTIAL Strong benefits from a combination Page 11
Slide 12: Highly complementary fit of Index business drives growth
CONFIDENTIAL Highly complementary fit of Index business drives growth Opportunity to unlock Russell Indexes full growth potential through increased scale and efficiencies Adds significant U.S. business and cross-selling opportunities to FTSE Incremental scale from the merged businesses enables
Slide 13: Complementary businesses and geographies
CONFIDENTIAL Complementary businesses and geographies Strengthened financial and geographic profile LSEG LSEG incl. Index(3) LSEG incl. Russell(3) 4% 4% 3% FY 2014(3) By Product 13% EBITDA(1) 34% 32% 33% 31% 38% LSEG: $975m (£574m) 27% 30% 27% 24% Russell: $236m (£139m) Combined: $1,211m (£713m) Leg
Slide 14: Creation of a global leader in index services
CONFIDENTIAL Creation of a global leader in index services Russell Offering FTSE Offering Leading U.S. equity benchmarks with $162(1) million of revenue from FTSE generated revenues of $296 million in FY2014(2) U.S. institutional clients in 2013 A leading global provider of equity benchmarks
Slide 15: Combined Index business positioned for success
CONFIDENTIAL Combined Index business positioned for success Index Providers by ETF AUM (All Asset Classes)(1) Strong Global Positioning ($ billions) Combination of index businesses positions the company to operate $800 successfully in the global environment Extended client servicing and product
Slide 16: Index business positioned to capitalise on industry trends
CONFIDENTIAL Index business positioned to capitalise on industry trends Industry Trends Development of Global AUM Split 2012 – 2020(1) Greater regulation of investment management industry 10% 11% AUM 2012 79% Investment committees focused on strategic decisions and $64tn allocations Active Focus on
Slide 17: Financial benefits and process considerations
CONFIDENTIAL Financial benefits and process considerations Page 17
Slide 18: Significant cost efficiency potential
CONFIDENTIAL Significant cost efficiency potential Optimisation of FTSE and Index business through harmonisation and keeping the best of both businesses Removing sales structure duplication Combination of research functions Eliminating duplication of data sources Index operations and systems
Slide 19: Accelerating growth opportunities through revenue synergies
CONFIDENTIAL Accelerating growth opportunities through revenue synergies Combination has the ability to drive meaningful growth Commercial Align commercial strategies to create a single, transparent structure across indices and licence types alignment, IP Harmonise charging structures to reflect
Slide 20: Acquisition structure and financing
CONFIDENTIAL Acquisition structure and financing Highlights Debt: Transaction to be funded with approximately $1,100 million (£648 million)(1) from existing and new bank facilities, keeping comfortable facility headroom post transaction Equity: Equity issuance net proceeds of approximately $1,60
Slide 21: Anticipated timetable
CONFIDENTIAL Anticipated timetable Expected Completion Late Q4 2014 / Early Q1 2015 26 June 2014 Transaction signing and announcement 16 July 2014 AGM at which rights issue authorities to be approved August / Prospectus published and posted to shareholders September 2014 September 2014 Gener
Slide 22: Strategic acquisition with strong growth potential
CONFIDENTIAL Strategic acquisition with strong growth potential Creates a global leader in indices – well positioned for growth Combined index businesses offers significant benefits to the market Provides a significant U.S. presence and accelerated growth potential Complementary index produc
Slide 23: Appendices
CONFIDENTIAL Appendices Page 23
Slide 24: Selected historical financials
CONFIDENTIAL Selected historical financials Summary audited US GAAP financial information(1) Year ended $ million 31 December 2013 Total gross revenues(2) 1,604 Total income from operations 204 Total assets(3)(4) 1,826 Summary unaudited management financial information Year ended $ million 31 Decemb
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