S&P and MSCI bid buzz turns heat on the LSE

Financial data giant S&P Global is believed to be plotting an audacious $11 billion (£9 billion) takeover of MSCI to create a global index behemoth.

City sources said MSCI, a Morgan Stanley spin-out which compiles some of the biggest market indices used by fund managers, has spurned a $120-per-share approach from the Wall Street giant behind the Dow Jones and S&P 500 indices.

Market chatter about the potential takeover comes amid a flurry of M&A activity among exchanges and indices providers, including the London Stock Exchange’s proposed tie-up with Deutsche Börse, which looks set to fall apart.

The move would heap more competitive pressure on the LSE, owner of the rival FTSE Russell index group.

MSCI and its major shareholders are understood to be holding out for a $130-a-share offer worth almost $12 billion in anticipation of a bidding battle, the sources added.

There are thought to be several other interested parties, including exchange houses and private-equity firms.

MSCI’s New York-listed shares rose to an all-time high yesterday of $96, valuing it at $8.8 billion, amid whispers in the market about a potential deal.

S&P is interested in MSCI’s indices arm and would look to spin off MSCI’s financial data analytics business, the sources said.

It would be similar to the move made by the LSE in 2014 when it bought Seattle-based Frank Russell for $2.7 billion. The LSE kept the indices business but sold the asset management arm after the deal completed.

MSCI was among the companies rumoured to be competing with the LSE for Frank Russell.

FTSE Russell, the LSE’s indices arm, was created when the LSE merged the FTSE Group with the Russell Indexes, a US-focused firm. The deal made the LSE the world’s third-biggest index provider behind S&P and MSCI.