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Friday, September 25, 2015

Is It Back to Square One For the Russell Spinoff?

News summary by MFWire's editors

It may be back to square one for the LSE's planned sale of Russell Investments [profile]. The door may be open for other bidders to enter the fray.

Cheng Boming
Citic Securities
Bloomberg's Cathy Kit Ching Chan, Aaron Kirchfield, and John Detrixhe report that, according to unnamed sources, the London Stock Exchange's $1.8-billion deal to sell the manager-of-managers to Citic Securities "is faltering and may soon collapse." Bloomberg separately reported that, again according to unnamed sources, Chinese authorities suspect Citic of "insider trading connected to the government's rescue of the stock market" during the Chinese stock market's recent trials and tribulations.

Though one source told Bloomberg that the talks with Citic aren't completely over, another source reportedly said that the LSE is again talking to other bidders.

This summer Reuters broke the news that Citic's $1.8-billion bid for Russell put it in the lead in the auction. If Citic is out of the picture, two other winners immediately come to mind: China-based online game developer Shanda Games, and Arlington, Virgina-based consulting giant Towers Watson. Earlier in the summer Reuters pointed to Citic, Shanda, and Towers as the three remaining bidders for Russell.

Yet Shanda, too, may be distracted by the Chinese stock market turmoil or by its own recent merger. And Towers is in the midst of its own merger, too.

As recently as April, reports cited brokerage Ameriprise as another possible bidder. Back in December word leaked that CIBC was considering bidding for Russell.

And then are the other bidders who lost out year when the LSE bought all of Russell for $2.7 billion just to get its hand on the indexing business. The exchange reportedly beat out private equity firms CVC Capital Partners, Silver Lake, TPG Capital, Warburg Pincus, as well as CIBC and indexer MSCI.

MFWire remains skeptical of how Russell's manager-of-managers and consulting business could fit alongside Ameriprise's Columbia Threadneedle (an active asset manager) or American Century (an active asset manager in which CIBC holds a sizable minority stake). A competing consulting firm, like Wilshire (which also has its own multi-manager mutual funds) or Callan (which has its own multi-manager collective funds) might be a better, less-conflicted fit.

Previous reports raised the possibility that insurance brokers like Aon or Marsh and McLennan might be interested.

Of course, there's always the possibility of private equity making a play, probably while teaming up with Russell's management. In addition to the four PE shops LSE outbid last year, other names that have been mentioned as possibilities include: Aquiline, Carlyle Group, Friedman Fleischer & Lowe, Genstar Capital, KKR, Stone Point Capital, TA Associates, and Thoma Bravo

Edited by: Neil Anderson, Managing Editor

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