The London Stock Exchange is reportedly in talks deemed “exclusive” to acquire Russell Investments, a deal that would bolster LSE’s indexing business.
LSE confirmed in a statement that it has entered exclusive talks with Russell’s parent company, Northwestern Mutual Life Insurance, reports Chad Bray for Deal Book.
Seattle-based Russell could be worth up to $3 billion in a sale, a figure that would represent LSE’s largest acquisition its more than 200-year history. In January, it was reported that Northwestern Mutual was mulling a sale of Russell. Although not mentioned in connection with Russell, it has also been reported that Nasdaq OMX Group (NasdaqGM: NDAQ) and S&P Dow Jones Indices are shopping for acquisitions to bolster their index offerings. [Nasdaq, S&P Hunt for Index Acquisitions]
Some potential suitors did not make it past the first round of bidding for Russell because they only want the indexing business and Northwestern Mutual would prefer not to break up Russell’s asset management and indexing unit.
In March, it was reported that Russell was drawing interest as a takeover target from private equity firms Blackstone (NYSE: BX) and Bain Capital. [Russell Draws Interest From Private Equity Suitors]
LSE’s designs on Russell make sense because of FTSE International’s growing index footprint in the North American exchange traded funds business. Over 100 U.S.-listed ETFs are benchmarked to FTSE indices.
Several of the largest international ETFs that trade in the U.S. are benchmarked to FTSE indices including the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), the largest emerging markets ETF by assets, and the Vanguard FTSE Europe ETF (NYSEArca: VGK). The iShares China Large-Cap ETF (NYSEArca: FXI), the largest China ETF, also tracks a FTSE index.
Russell is in the index provider for large ETFs such as the $25.1 billion iShares Russell 2000 ETF (NYSEArca: IWM) and the $6 billion iShares Russell Midcap Value ETF (NYSEArca: IWS).
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of IWM.