Referring to recent press speculation linking the group to a deal, it clarified that, while it is considering a transaction, nothing is yet forthcoming and, were a deal to proceed, it would intend to “part fund it through an equity raise”.
Talk that Northwestern was considering the sale of Russell, which it bought in 1999, first surfaced in January, when Reuters reported that Northwestern no longer considered it core to its business.
While there are, as yet, no actual details of how or what the transaction would look like, at first glance, it is likely to be the index part of the Russell business that is of most value to the London Stock Exchange Group.
Russell Investments, apart from owning a pensions and an asset management business, is the creator of the Russell 1000 Global index.
From a strategic standpoint, there is likely to be a lot of synergy to be found between the London Stock Exchange Group and Russell Investments Index business.
Speaking to Portfolio Adviser on Tuesday morning, Mark Thomas, an analyst at Edison Investment Research said: “In terms of strategy, the way to get critical mass and economies of scale from an index business is to grow the number of indices one has. The LSEG has certainly talked about increasing its presence within the US index space, so this is perfectly consistent with what it has been saying.”
At a broader level there is also rationale for this kind of M&A as companies across sectors look to bolster returns.
Ed Smith of Cannaccord Genuity told Portfolio Adviser: “In the current environment, earnings growth isn’t the easiest thing to generate, so it is understandable that companies are turning to M&A, especially if they can identify clear synergies.”
