New York-based private equity and asset management firm, Blackstone Group, is expected to go ahead with the merger of its financial data firm Refinitiv with the London Stock Exchange Group (LSE). The company is expected to officially announce the $27 billion deal within a week.
Despite already being in the advanced stages of agreement, the merger deal for the company's majority-owned data firm may be facing some difficult hurdles ahead. One of the major hurdles that may delay the agreement is an antitrust review from regulators that may take months to conclude.
The companies involved in the deal have reportedly already weighed the possible regulatory hurdles that may delay the deal. The LSE is reportedly also already prepared for its shares to drop if Britain does indeed exit the EU without a deal in October.
The LSE, Blackstone, and Thomson Reuters Corp are reportedly already in agreement on the finer details of the deal. The companies are expected to make a formal announcement in the first week of August, around the same time the LSE is expected to release its first half of the year results.
The deal will greatly expand the LSE's data and information gathering services, which has sparked concern amongst regulators. The acquisition of Refinitiv would give the bourse a more stable source of cash flow and a big advantage over its competitors such as the Intercontinental Exchange and the Deutsche Boerse AG.
Antitrust regulators from both Europe and the United States are expected to launch their own reviews into the multi-billion dollar deal. The likely in-depth reviews into the details and repercussions of the deal will likely take up to 18 months.
According to reports citing sources close to the matter, the EU's review alone, which will likely be a Phase 2 investigation, could take more than a year to complete. These types of reviews are typically reserved for mergers and acquisitions that are seen to have a major impact on industry-specific competition.
Apart from making sure that the LSE will not get an unfair advantage over competitors, the investigation will also attempt to look at how the deal would affect the price of financial data moving forward.
As part of the agreement and as a way to appease regulators, Refinitiv and Blackstone have agreed to implement share lock-up periods for investors. The lock-up periods are expected to last through 2022, depending on when the deal will be finalized.
The LSE has mentioned that it does not intend for the deal to be a "quick flip," as it does plan to heavily invest into the combined entity for the next three to four years. If the acquisition pushes through, Blackstone will essentially be doubling the investment it made in the data company just nine months ago.
