London Stock Exchange Group [LON:LSEG] is in investors' sights after the third multibillion-pound stock placement of 2023 was priced tight on Wednesday (6 September) evening; buysiders flooded the books following the strong performance in the previous two transactions, according to two sources close to the deal.   

Before the deal, the sellers, a consortium including Blackstone, Canada Pension Plan Investment Board, an affiliate of GIC Special Investments and Thomson Reuters [NYSE:TRI], held 51.9m voting shares and 51.1m limited-voting ordinary shares representing around 103m shares. 

An accelerated deal on Wednesday night for 28.3m shares, worth around GBP 2.25bn (USD 2.8bn), was part an overall monetisation of 43.1m shares by the consortium in the form of the share sale, a sale of call options and a GBP 750m share buy-back by LSEG, as announced. 

The Wednesday sale, where 25.5m shares were sold in a straight sale and 2.8m shares sold as part of a delta placement to hedge the call options, was priced at GBP 79.5 a share, a discount of 3.7% from the closing price of GBP 82.64. 

The stake sale on Wednesday represented a 5.1% stake in LSEG, translating to a Dealogic Price of Liquidity (PoL) ratio of -0.73x. 

The ratio is far cheaper than the average -1.5x PoL ratio on block trades priced in August and almost exactly in line with the two previous mega blocks in the name priced by the sellers this year. 

“It’s interesting the pricing is so in line with the other two, because the book was broadly in similar shape as well,” said the first source close to the transaction. The book had around 120 lines and the top 20 investors took two thirds of it, the source added. 

Both sources indicated that the performance of the last two blocks in LSEG group had driven several investors to the deal. 

In its weekly column, this news service’s ECM Pulse noted that several funds were targeting blocks as a way to generate performance against their index benchmarks before the end of the year. 

The previous two LSEG trades were some of the best performing blocks of 2023, with the March sell-down generating just over 12% gains for investors over one month, and the May deal around 8%.   

“Hedge funds were also happy to take part in size and what you are seeing there is the consortium reaping the benefits of the performance from the trades in March and May,” said the second source. 

In the first few hours of trading on Thursday 7 September, the stock was up at GBP 81.5, already 2.5% above the offer price. 

A real following 

Alongside deal playing hedge funds looking for performance, several institutions with a longer-term investment horizon took part.  

The first source said the book was filled with several institutional investors, including those that don’t tend to regularly show up in ECM deals, and some large anchor orders, including one from a North American pension fund. 

Some of the anchors had placed USD 150m-plus orders in the transaction that concentrated the book at the top, the second source said. 

The deal saw a large take-up by existing shareholders in LSEG, the first source noted. “There was a real following in this trade from existing shareholders and there may come a point where people might think that they are overweight in the stock, but at the moment it doesn’t seem like that is the case.” 

According to Dealogic Institutional Analytics, some of the largest institutional holders in LSEG included Royal London Group, T. Rowe Price, Invesco, LionTrust Group and Safra Group, as of 30 June. 

Some of the biggest buyers of the stock, according to their last disclosures, include Federated Hermes, DNB Group and Canadian pension fund Caisse de dépôt et placement du Québec (CDP). 

This news service predicted a possible deal in LSEG as part of its regular Lock-up Tracker. But the sellers had been prevented from selling more than a small stake in the deal under the terms of a relationship agreement under which they acquired the stake, as part of LSEG’s acquisition of Refinitive. 

For such a sizeable deal to take place, LSEG altered the terms of the relationship agreement that had prevented the sellers from offloading more of their holdings until January 2024, as per the release.  

The sellers are now locked up for 180 days on their remaining 59.9m shares.