LSEG announced that 11 global banks (together, the Investing Banks) have agreed to invest in its Post Trade Solutions business, acquiring a 20% stake. The Investing Banks will each now become shareholders in Post Trade Solutions, acquiring the stake for “aggregate cash consideration of £170 million, valuing the whole of Post Trade Solutions at £850 million.” Post Trade Solutions generated revenue of “£96 million and normalised EBITDA of £16 million in 2024.”
The Investing Banks are customers of LSEG’s clearing services and Post Trade Solutions business.
As a result, this initiative continues the history of partnership with LSEG and market participants, replicating the first LCH model “that continues to prove so successful for LCH and its customers.”
As shareholders in Post Trade Solutions, the Investing Banks will reportedly benefit from input into Post Trade Solutions as well as its anticipated growth. Three directors nominated by the Investing Banks will now be joining the Board of Post Trade Solutions.
LSEG will reportedly be acquiring a greater proportion of the revenue surplus3 from the SwapClear business. Previously, the founding members of SwapClear, which include the Investing Banks, were entitled to “c.30% of SwapClear’s revenue surplus through to 2035 (the Revenue Surplus Share).”
As a result of this transaction, the Revenue Surplus Share for the SwapClear banks will reduce to “15% for 2025 (applied retroactively to 1 January 2025) and 10% from 2026.”
The Investing Banks have confirmed their commitment to the ongoing partnership in SwapClear via an extension of the “Revenue Surplus Share at the 10% level from 2035 until 2045.”
The amount paid in relation to the Revenue Surplus Share in 2024, included in LSEG’s cost of sales, “was €0.2 billion.” LSEG is paying a total cash consideration of “£1.15 billion for this change in terms, payable in two instalments in 2025 and 2026.”
A further payment of up to a maximum of “£200 million will be payable should certain future growth targets be met.”
The transaction will be “accretive to the EBITDA margin” of the Markets division and LSEG as a whole, and will be “approximately 2-3% accretive to AEPS in 2025 with further benefits anticipated in 2026.”
Daniel Maguire, Head of Markets, LSEG and CEO, LCH Group, has said that their SwapClear business was at the forefront of advancements when it was founded in collaboration with their clearing members.
Maguire added that the clearing services have been successful in generating substantial growth and “ensuring risk management for the OTC derivatives market.” This has only been possible because of their “long-term strategic partnership with customers.”