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Rating:Just How Much Can the LSE Make From a Partial Sale of Russell? Not Rated 0.0 Email Routing List Email & Route  Print Print
Wednesday, February 25, 2015

Just How Much Can the LSE Make From a Partial Sale of Russell?

News summary by MFWire's editors

The price of buying Russell Investments' [profile] asset management business could be up to $1.5 billion.

Sophie Baker, Randy Diamond, and Areleen Jacobius of Pensions and Invesmtents report that, according to unnamed sources, the London Stock Exchange is reaching out to about 100 possible bidders and aiming for a price of $1.2 billion to $1.5 billion. LSE officially put the Russell asset management unit on the block earlier this month after buying all of Russell last year and then putting this unit under the microscope of a "comprehensive review" while hanging on to Russell's indexing business.

The LSE disclosed that the Russell manager-of-managers unit had EBITDA in 2013 of $153 million. Asset management investment banker Don Putnam of Grail Partners tells the trade publication that the sale could fetch a price of eight to nine times EBITDA, which translates into $1.2 billion to $1.4 billion, close to the range the unnamed sources claim that the LSE is shooting for. That compares to the 12 times EBITDA TIAA-CREF paid last year for Nuveen.

"There is not a chance in hell that LSE will get 12 times EBITDA," Putnam tells P&I.

The Russell unit up for sale has $275.1 billion of assets under management. So, put another way, the LSE is seeking 0.44 to 0.55 percent of AUM.

RBC Capital Markets analyst Peter Lenardos also weighed in on the sale, pointing out "the suboptimal operating profit margin at Russell Investments." He predicts that a deal could be announced in two months or less.

"I'd look at if I could find synergies, improve the operations, strip out costs," Lenardos tells the trade publication, "and I would get access to 250 key institutions in the U.S."
P&I also dug into the auction's impact on Russell's clients, reporting "no significant defections" from Russell so far. 

Edited by: Neil Anderson, Managing Editor

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