LSEG in talks to buy Permira-owned Octus data group for about $3.5 billion

By Amy-Jo Crowley

LONDON, Oct 13 (Reuters) - The London Stock Exchange Group confirmed on Tuesday it is in talks with private equity firm Permira to acquire financial data group Octus for about $3.5 billion.

No final agreement has been reached and no transaction is guaranteed, LSEG said, adding that New York-headquartered Octus has a strong track record of double-digit revenue growth based on a high-retention subscription model.

LSEG shares, which fell more than 2% on a Reuters report on the talks earlier on Tuesday, extended losses to 4.7% at 1342 GMT. London-listed LSEG had a market value of $55.8 billion as of Monday's market close. 

"Octus' coverage and solutions are highly complementary to LSEG's existing fixed income data & analytics and private markets solutions," said exchange operator LSEG.

LSEG said a takeover of Octus, which was launched by its CEO Kent Collier in 2013, would be immediately accretive to its Data & Analytics and group revenue growth.

Reuters has reported that Collier still holds a minority stake in Octus, which employs journalists, analysts and legal experts to provide information on credit markets, with a focus on companies in financial distress, for banks and investors.

PERMIRA BOUGHT CONTROLLING STAKE IN OCTUS IN 2022

London-based Permira is working with advisers to evaluate interest in Octus, two people with knowledge of the situation said before LSEG confirmed the talks. 

The private equity group, which declined to comment, has been planning a sale of Octus since last year and has also held talks with other potential buyers, one of the people said. 

Permira acquired a controlling stake in Octus from Warburg Pincus in 2022 at a valuation of $1.3 billion.

Octus is expected to generate about $145 million of earnings before interest, taxes, depreciation and amortisation (EBITDA) this year, with that figure forecast to rise to roughly $200 million next year, one of the people said. 

LSEG has been under pressure from activist investor Elliott Management, which disclosed a stake in the group in February. 

The strategic rationale for LSEG would likely include adding proprietary and private-market data assets, creating cross-selling opportunities with Tradeweb and Yield Book, traders at one bank said, as well as expanding its client base to include private-market general partners.

Similar data transactions have generally been valued at about 12 to 14 times enterprise value-to-sales, and a deal at these multiples would likely be dilutive to earnings per share.

LSEG declined to comment on these observations.

LSEG is the largest customer of Reuters, which provides news for its Workspace news and data platform and other products. 

An Octus takeover, if it goes ahead, would also mark a further uptick in dealmaking in the data analytics sector, despite a ​selloff in listed stocks earlier this year.  

YipitData, backed by investors including Carlyle Group, is exploring a sale that could value the data analytics provider at more than $2.5 billion, while Vista Equity Partners is exploring a sale of private markets data provider Allvue.  

(Reporting by Amy-Jo Crowley in London; Additional reporting by Milana Vinn in New York and Tommy Reggiori Wilkes in London; Editing by Anousha Sakoui, Elisa Martinuzzi, Jan Harvey and Alexander Smith)