The London Stock Exchange Group is in talks to combine with Refinitiv in a deal that would create a global exchanges and data powerhouse, according to multiple people briefed on the matter.
A deal for all or large parts of Refinitiv, carved out of Thomson Reuters only last year in a deal with Blackstone, would also transform the LSE into the main rival to billionaire Michael Bloomberg's financial news and data empire.
A transaction may be announced as soon as next week, two of these people said. These people cautioned that there was no certainty that an agreement would be reached.
The LSE has a market value of about £19.3 billion ($36b) and a net debt of about £1b. Refinitiv, whose Eikon terminals are the main rival on trading floors around financial centres to Bloomberg, was valued at US$20b ($30.1b) last year.
It was bought by a private equity consortium led by Blackstone, which acquired a majority of the business from Thomson Reuters, the news and data group.
The exact price that LSE would be paying for Refinitiv and the structure of the deal could not be learnt. However, it is believed to have already begun sounding out debt markets to raise funds for the transaction.
If consummated, the deal would instantly transform the LSE, which is best known for running stock and derivatives exchanges, into a more diversified market data and analytics leader under David Schwimmer, the former Goldman Sachs banker.
Schwimmer was named chief executive of the LSE last April after a multi-month search to replace Xavier Rolet, the Frenchman who ended his eight-year run at the group following a governance crisis.
The talks come at a time when London's role as a global financial centre is facing questions, with the UK preparing to withdraw from the EU under its new prime minister Boris Johnson.
Only 18 months ago, the Blackstone-led consortium, which included Canada Pension Plan Investment Board and Singapore state fund GIC, agreed to purchase a 55 per cent stake in the financial and risk division of Thomson Reuters, with the latter retaining the minority stake in the division, Reuters newswire and other units.
Trump escalates feud with Apple over offshore factories
Fran O'Sullivan: Ardern still leaning on the trainer wheels
Since then, the investors rebranded the business Refinitiv and embarked on a cost-cutting campaign to make the business more efficient.
Following the leveraged buyout, Refinitiv has been laden with about US$13.5b of debt. The consortium has agreed to pay Reuters News a minimum of US$325 million per year for 30 years as part of the deal.
The LSE and Blackstone declined to comment. Shares in Thomson Reuters, which holds a 45 per cent stake in privately held Refinitiv, jumped 4.1 per cent in New York trading.
Refinitiv had been expected to sell some assets after Blackstone took control of the company. In previous months, it had been in talks with Deutsche Börse to sell its foreign exchange business FXall, an electronic currency trading platform worth about US$3.5b. Deutsche Börse recently said it was still in talks.
The transformation of the busienss began under Xavier Rolet, who stepped down as chief executive of the LSE in the autumn of 2017.
The former banker spent more than £4b on acquiring data and clearing businesses, responding to the evolution of markets after the financial crisis.
Among the most high-profile deals were the purchase of index compilers Russell Investments and FTSE International, 50 per cent of which it already owned.
It also bought a controlling stake in LCH, the clearing house. Most notably, Rolet attempted a merger with the LSE's main European rival, Deutsche Börse, which collapsed in March 2017.
Refinitiv would bolster the LSE's existing data and analytics offerings, which include Mergent, a service providing information on private companies, and XTF, which focuses on exchange traded funds. The group also owns The Yield Book, a fixed income indexing service.
Exchange groups in the US and Europe have built up their data and analytics offerings in recent years as trading in stocks and bonds has become more electronic, relying on faster data sources that they can charge a premium for.
Written by: Arash Massoudi, Javier Espinoza, Bryce Elder in London and James Fontanella-Khan
© Financial Times