LSEG to buy Octus in $3.5 billion deal to shield from AI disruption

LONDON, Oct 22 (Reuters) - The London Stock Exchange Group will buy credit data firm Octus for $3.54 billion, it said on Thursday, marking its biggest acquisition in seven years as it seeks to bolster its data and analytics offering in the face of AI-linked disruption.

LSEG CEO David Schwimmer said the deal gave the company access to Octus' highly specialised proprietary data, which no large language model was "going to be able to scoop ... up anywhere".

LSEG shares jumped 6%, erasing year-to-date losses and putting the stock up 4% this year. They are still down about 24% from their 2025 peak, weighed down by investor concerns that AI could disrupt the group's financial data business and squeeze margins.

The operator of the London Stock Exchange and the Tradeweb marketplace is repositioning to keep up with the rapid pace of AI adoption among investors and businesses.

It expects the Octus purchase to be neutral to adjusted earnings in the first full year after completion and to add to earnings thereafter, it said in a statement alongside a third-quarter update where it raised annual guidance for revenue and margins.

The deal, which it said will "transform LSEG’s presence in credit and private market data", is due to be financed by external debt. Octus will add $300 million-$320 million to revenue this year, LSEG CFO Michel-Alain Proch said on an investor call.

The company has also been under pressure from activist investor Elliott, which is pushing for portfolio changes, Reuters previously reported, as AI affects how investors and businesses trade and use data.

Elliott, which disclosed a stake in the group in February, did not respond to a request for comment on the Octus deal. LSEG has previously said that there had been "good, constructive dialogue with Elliott".

DEALMAKING

The Octus acquisition comes just after Tradeweb Markets - majority owned by LSEG - announced that it would buy bond-trading platform Trumid for almost $2 billion on Monday.

"We have looked at many deals over the last five years, and very few made the cut. In terms of strategic fit or financial return, these acquisitions do both," Schwimmer said on the investor call.

LSEG said Octus' product set and customer coverage "are highly complementary" to its existing fixed-income products, allowing it to expand its services in that market.

Octus employs journalists, analysts and legal experts to provide information on credit markets, with a focus on companies in financial distress, for banks and investors.

LSEG, which is working to roll out AI tools and license its proprietary data, is seeing "great" AI adoption and significant signs of monetisation at this point, Schwimmer said, adding that he expected that to continue.

In 2019, LSEG agreed to buy Refinitiv for $27 billion from Reuters parent Thomson Reuters, to help it become a major distributor as well as a creator of market data.

ANNUAL GUIDANCE RAISED

The company on Thursday forecast organic total income excluding recoveries to grow at least 8% at constant currencies, up from its previously forecast range of 7% to 7.5%.

LSEG added that it expects to conclude its current share repurchase programme by February 2027, and that it has capacity for further share buybacks of between £1 billion and £1.5 billion ($1.34 billion and $2.01 billion) next year.

"We think this is a good print, and the revision of the targets, combined with the announcement of potential additional buybacks, despite the planned acquisitions by the Group, should be well received today," said JPMorgan analysts in a note.

Morgan Stanley was the lead advisor to LSEG. Evercore and Goldman Sachs advised Octus' shareholders including majority owner buyout group Permira.

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

($1 = 0.7473 pounds)

(Reporting by Pushkala Aripaka in Bengaluru, Samuel Indyk and Muvija M in London; Editing by Mrigank Dhaniwala, Janane Venkatraman, Tomasz Janowski and Susan Fenton)