The company wanted Frank Russell’s index business to bolster its own FTSE worldwide division, which makes money from licensing benchmarks to creators of exchange-traded funds and other financial products. US$1.000 billion or 654 million pounds will be paid in cash on completion, with the balance of US$150 million or 98 million pounds paid annually in four equal cash instalments, starting from 31 December 2017.
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For Russell, the deal marks the end of a long process of being shopped around.
It confirmed the deal is expected to close with proceeds payable to LSEG in the first half of 2016, with the separation of the Russell Index business from Russell Investments due to be completed in the first quarter of next year. Discussions with CITIC reportedly reached a fairly advanced stage, but were torpedoed by the meltdown in Chinese stock market, thus opening the door again to private equity bidders. That would equate to a purchase price for the Russell index business of about $1.86 billion, the company said. It expects to use the cash proceeds to reduce debt.
“We are pleased to partner with TA Associates on the acquisition of Russell Investments”, added Added Milton Berlinski, managing partner of Reverence Capital. Len Brennan, President and CEO, will continue to lead Russell Investments, and will remain a member of the Board of Russell Investments.
LSE, which put up Russell Investments on the block in February, said it would receive net proceeds of about $920m from the sale after tax and expenses.
The market operator was said to be close to selling the Russell Investments to China’s Citic Securities Co. for as much as $1.8 billion. We look forward to working with them and Russell Investments’ management to deliver a smooth transition of ownership.
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TA Associates is one of the largest private equity firms in the world. The management arm – which as of last June managed $266 billion in assets – was not a good fit.
