London Stock Exchange Owner in Talks to Acquire US Financial Data Firm Octus

London Stock Exchange Group (LSEG) is reportedly in discussions to acquire Octus, a New York-based financial data business, for approximately £2.6 billion. The potential acquisition from private equity firm Permira would represent a notable shift from the ongoing trend of U.S. entities purchasing British companies.

Permira, which acquired a controlling stake in Octus in 2022 for £1 billion, has been exploring a sale since last year and has engaged with other potential buyers. Octus specializes in providing information for credit markets, focusing on companies experiencing financial distress. Its services are utilized by banks and investors, employing journalists, analysts, legal experts, and technology to analyze regulatory and court filings.

LSEG confirmed it was in discussions for the acquisition, noting Octus's strong position in the high-growth area of illiquid and private credit. The company highlighted Octus's consistent double-digit revenue growth, driven by a subscription model with high retention rates, and stated that the acquisition would immediately enhance LSEG's revenue growth.

However, LSEG cautioned that no final agreement has been reached, and a deal is not guaranteed. Any potential transaction would require regulatory approval.

LSEG, while owning the London Stock Exchange, derives the majority of its revenue from its data and analytics division. This move follows LSEG's significant 2021 acquisition of the financial data and news provider Refinitiv for £20 billion.

Following the news of the Octus talks, LSEG shares closed down 4.7%, or 410 pence, at 8350 pence. RBC analyst Ben Bathhurst described the market reaction as potentially overdone, suggesting the deal is unlikely to derail LSEG's planned £3 billion share buyback program. Bathurst indicated that LSEG's confirmation of a specific valuation suggests the discussions are fairly advanced.

The potential acquisition of Octus stands in contrast to a recent surge in takeovers of UK-listed companies. A report this week from City broker Peel Hunt highlighted an "unprecedented pace" of merger and acquisition activity, with 166 takeovers valued at £180 billion since the beginning of 2023. This year alone has seen £74 billion in such deals, targeting companies including Easyjet, Segro, Beazley, Schroders, and Tate & Lyle.

Conversely, the London market has experienced only 11 new listings worth £6 billion through initial public offerings (IPOs) since 2023. Additionally, firms such as Flutter, the owner of Paddy Power, and Tui have delisted from the London Stock Exchange to pursue listings on exchanges in New York and Europe. Charles Hall, head of research at Peel Hunt, stated that it is a significant understatement to say the UK faces challenges in retaining its companies and attracting new listings.