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Advisers enjoy £280m fee bonanza on LSE-Refinitiv deal

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Via Financial Times

Bankers, lawyers and other advisers are set to take home a combined £281m for their work on the London Stock Exchange’s $27bn takeover of financial data provider Refinitiv, in a huge payday for some of London’s top dealmakers.

The figure ranks as one of the biggest for pure advisory work on a UK deal, before factoring in the costs of financing the transaction.

Banks typically take home the bulk of their fees in respect of a deal’s financing. Advisory fees on the £4bn takeover of defence contractor Cobham, for example, amounted to just £83m of a total fee pool of £200m, when financing costs were added.

The much bigger, financing-related fees for the Refinitiv deal, which is designed to transform the LSE into a markets data powerhouse, will emerge over the next year as the takeover navigates shareholder and antitrust hurdles.

The advisory fee estimates were published by the LSE on Wednesday as part of the offer document for a shareholder vote at the end of the month.

The exchange is being advised by Goldman Sachs, Morgan Stanley, Robey Warshaw, Barclays and RBC Capital Markets, and lawyers led by Freshfields Bruckhaus Deringer. Evercore, Canson Capital Partners and Jefferies are among those acting for Refinitiv.

The LSE is betting on a structural shift in financial markets in the coming decade as vast quantities of data power all areas of investing in capital markets, from decision-making and analytics to executing deals.

The LSE is buying Refinitiv from a private equity consortium led by Blackstone, the private equity group. The deal represents a rapid turnround from the consortium, which acquired a majority of the business from Thomson Reuters, the news and data group, for $17bn last year. It will hold a 37 per cent stake in the enlarged LSE.

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Analysts and investors are expecting the deal to proceed after Hong Kong Exchanges and Clearing withdrew a rival £32bn offer for the LSE last month. That offer was contingent on the LSE giving up its agreed deal for Refinitiv.

David Schwimmer, chief executive of the LSE, has been supported by shareholders since the deal became public in late July. Its share price has risen more than 20 per cent and many publicly preferred the Refinitiv deal over the HKEX offer.

If it closes, more than 70 per cent of LSE group earnings will come from annual data subscriptions from Refinitiv’s 400,000 customers, rather than trading. The deal will also give the LSE access to the vast foreign exchange and fixed income markets, as Refinitiv owns currency trading venues and a majority share in Tradeweb, the bond trading platform.

But the exchange will also need to squeeze more out of Refinitiv, a company with a record of underperformance in the last decade. According to corporate filings last week, Refinitiv revenues in the three months to September 30 rose 1 per cent to $1.6bn. Its adjusted ebitda margin was 34.9 per cent compared to 35.4 per cent for the first nine months of the year. The LSE is targeting a combined adjusted ebitda margin of about 50 per cent “in the medium term”.

However, Refinitiv has reached two-thirds of the $650m cost savings the new owners intend to make by the end of 2020. The LSE is planning to make a further £225m of savings by 2025.

The LSE expects to hold the shareholder meeting on November 26. The exchange will have to pay a £25m fee to Refinitiv if shareholders vote down the deal. If approved it expects to file its application before antitrust authorities in Brussels before the end of the year and close the deal in the second half of next year.

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