The London Stock Exchange is set to sell its asset management business, Russell Investments, in an all cash deal for $1.15bn (£748m, €1bn) to private equity firms, TA Associates and Reverence Capital. While TA will hold the majority stake, post taxes and expenses LSE will receive net proceeds of about $920m.
Under the deal, LSE will initially receive $1bn in cash and the remaining $150m will be paid in four annual cash instalments, beginning from December 2017.
"We are very pleased to have agreed the proposed sale of Russell Investments to TA Associates and Reverence Capital, both of whom have strong track records investing in the asset management industry," LSE's chief executive, Xavier Rolet said.
Russell Investments manages funds worth $266bn. It has a reported pretax profit of $43m -- for the six months ended 30 June -- and is part of the index compiler Frank Russell's business that LSE purchased in July 2014 for $2.7bn. Frank Russell's first-time, half-year revenue contribution helped LSE's operating climb up 27% to £366.1m ($562m). The investment management business contributed £497.3m towards LSE's half-year revenues of £1.16bn.
In August 2014 LSE was planning a rights issue of £938m to fund its acquisition of Frank Russell. It had then confirmed that the process of separating Russell Index business from Russell Investments was expected to be completed in the first quarter of 2016. The stock exchange finally decided to put the business up for sale in February 2015 for $1.8bn.
"Until completion, LSE remains firmly committed to Russell Investments, its global customer base, its exemplary client service and its innovative product offering," Rolet said.
LSE was advised on this deal by JP Morgan and Goldman Sachs.