The London Stock Exchange Group has entered exclusive talks to buy Russell Investments, the index compiler and asset manager, that is expected to fetch about $3bn, said people familiar with the discussions.
A deal at that size would be the biggest in the LSE's 213-year history and mark its boldest push into the US where Russell is best known for its equity benchmarks such as the Russell 2000.
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One person close to the situation cautioned that talks may still fall apart and no outcome is expected for at least a couple of weeks.
The development comes a week after the LSE confirmed it was in late-stage talks for Russell, which is being spun out by its parent company, Northwestern Mutual, in an auction.
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At the time, other bidders including MSCI, a leader in securities indexing, and Canadian Imperial Bank of Commerce, which is looking to expand its footprint into the US, were also said to be in the running. The auction has also attracted interest from private equity groups, but they are believed to have lost ground to strategic buyers as talks progressed this month. Goldman Sachs, which is working on behalf of Russell, declined to comment.
Owning the Russell index and its affiliated products would be a transformational leap for the LSE. It would be part of a bold push into the US market where the Russell name is prominent among traders and fund managers.
A purchase would also allow the exchange to unite the index business with FTSE International, which it owns outright after purchasing the 50 per cent it did not own from Pearson, the parent company of the Financial Times, for £450m in 2011.
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Russell's business also comprises consulting and asset management, with about $260bn in assets under management. A deal for Russell would be part funded through an equity raising, the LSE said last week.
The combination would allow the LSE to take on leaders in the indexing business – MSCI and Dow Jones Indices – in a sector that has also seen Nasdaq OMX, Markit and Bloomberg further their interest and ambitions in recent years.
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The LSE's move is the latest indication of how rival exchanges and financial data companies have sought to tighten their grip on market data compilers as fund managers demand more index-based products, value-added data and analytical tools.
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