Reverence Capital Partners, partnered with TA for the deal and will make a “significant minority investment in Russell Investments”, LSEG said.
While the price was at the lower end of analyst forecasts, most see the sale as a good move for the group. As Numis Securities pointed out in a note on the deal: “it allows management to focus on delivering its targeted growth strategy and achieving the expected cost synergies.”
Under the terms of the deal, which is expected to close in the first half of next year, LSEG will receive $1bn (£654m) on completion and the remaining $150m (£98m) in four equal cash instalments, paid annually starting from 31 December 2017.
LSEG plans to use the net proceeds of the deal, which includes earnings from Russell Investments during LSEG’s period of ownership is expected to be around $920m (£601m), to pay down debt.
“The net cash proceeds of the transaction will be applied to LSEG’s existing net debt, reducing LSEG’s pro forma leverage to approximately 1.6x net debt to EBITDA8, if measured as at 30 June 2015,” the firm said.
The firm also said it expects to finish the separation of the Russell Index business from Russell Investments in the first half of 2016, after which it will be fully integrated with FTSE; FTSE Russell is the overall operating business for both index offerings.
Under the terms of the deal, Len Brennan, president and CEO, will continue to lead Russell Investments, and will remain a member of the Board of Russell Investments, but he will step down from the Executive Committee of LSEG on closing.
Brennan said of the deal: “This transaction brings together a global asset manager with two of the most experienced private equity firms with significant asset management expertise. Russell Investments will maintain its operational independence, and TA Associates and Reverence Capital will provide us with strong financial backing, new strategic insights, and a commitment to help us continue to deliver innovative investment solutions to our global client base.”
