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City bonanza as London Stock Exchange unveils £1.6 billion rights issue


The City enjoyed a £25 million bonanza as the London Stock Exchange raised £938 million on Friday through a rights issue to part-fund its $2.7 billion  (£1.6 billion) takeover of US indices firm Frank Russell.

The issue is being offered on the basis of three new shares for every 11 owned at a deeply discounted price of 1295p a share. LSE shares dipped 16p to 1989p on the news.

The vast bulk of the £25 million the LSE is paying in fees will go to the underwiters of the issue of whom there are no fewer than eight — Barclays, RBC Capital Markets, Deutsche Bank, JPMorgan Cazenove, Banca IMI, Banco Santander, HSBC and Mitsubishi UFJ Securities.

They guarantee that the LSE will get the cash it needs by promising to take up any rights not claimed by existing shareholders. But at a 35 per cent discount to the current share price, the risk to the underwriters is very low.

LSE shares have actually risen 13 per cent since it first revealed in May that it was in exclusive talks to buy Frank Russell. LSE chief executive Xavier Rolet said: “This is a strong strategic acquisition for the group, which will accelerate development in one of our core strengths, intellectual property, and offers significant growth potential.”

LSE also reported a 26 per cent rise in pre-tax profits  to £130 million in the three months to June on a 20per cent rise in revenues. It added that this month had already seen seven new flotations in a “traditionally quite period.”