LSE Reaches 13-Year High as U.S. Generates More RevenueJohn Detrixhe
London Stock Exchange Group Plc briefly rallied to its highest price in at least 13 years after revealing that the U.S. has overtaken the U.K. as its largest source of revenue for the first time.
Almost one-third of the company’s sales will come from the U.S. once it completes the purchase of Frank Russell Co. within the next few weeks, according to a filing. The exchange operator agreed to buy the company from Northwestern Mutual Life Insurance Co. for $2.7 billion in June. The acquisition will help bolster LSE’s index business, FTSE International Ltd.
LSE’s shares rose 2.3 percent to 2,071 pence at 3:04 p.m. in London after briefly touching 2,087 pence, their highest price since 2001. The owner of the London Stock Exchange also announced that its revenue increased 18 percent to 592.6 million pounds ($933 million) in the six months through September.
“What the market is applauding is strong organic revenue growth,” Peter Lenardos, an analyst at RBC Capital Markets LLC, said in a phone interview. “They went up and down the trading cycle to diversify. They not only diversified geographically, mainly toward North America, but also by product as well.”
LSE said it will probably finish reviewing Russell’s Investment Management business late this year or early in 2015.
“We continue to believe that the investment-management unit will be sold,” Lenardos said.
The Frank Russell acquisition is the latest in a series of deals that have helped LSE diversify away from its traditional equities business. The company bought the 50 percent of FTSE International that it didn’t already own in December 2011, and completed its purchase of a majority stake in clearinghouse LCH.Clearnet Group Ltd. in 2013.
Changing regulations within the European Union have enabled trading venues such as Bats Chi-X Europe -- part of Bats Global Markets Inc. -- to compete with established stock exchanges. Bats has processed 23 percent of European equity trading by volume this month, according to data compiled by the company. LSE has handled 21 percent, and its Turquoise market a further 8.8 percent.