The acquisition, according to the exchange, will build upon the L.S.E.’s strategy to diversify and expand its intellectual property platform. The deal also gives the exchange a presence in the United States, the world’s largest financial services market.
The exchange already owns FTSE Group, the operator of indexes including the FTSE 100, which tracks the top 100 stocks traded in London.
The L.S.E. first confirmed in May that it was in discussions with Northwestern Mutual, Russell’s majority owner, about a possible sale. The exchange would acquire all of Russell’s share capital from Northwestern Mutual and minority shareholders.
Northwestern Mutual said in January that it was exploring options for its stake in Russell Investments.
Xavier Rolet, chief executive of the L.S.E., said in a statement on Thursday, “With this acquisition we are strongly positioned for the changing dynamics in the global indices market with a best in class offering, which we believe will help deliver outstanding returns for our shareholders.”
Russell Investments, based in Seattle, operates an asset management business and a stock market indexing business. The company has about $256 billion in assets under management. It says that about $5.2 trillion in assets are referenced against its United States indexes, the best known of which is the Russell 2000 for small-cap stocks.
The L.S.E. said it would undertake a “comprehensive review” of Russell’s investment management business to see how it fits in the group.
The exchange said it was “committed to maintaining a clear focus on client service, fund performance and management and employee stability, whilst ensuring appropriate standalone governance.”
The transaction requires shareholder approval, which is expected in September, the exchange said. It expects to issue additional shares in order to raise about $1.6 billion to help finance the transaction. The L.S.E. also will use existing and new debt to complete the transaction.
Once the deal is completed, Len Brennan, the president and chief executive of Russell investments, is to join the exchange’s executive committee.
The L.S.E. said it expected to achieve $78 million in annual cost savings within three years following the deal.
“The combination of our index business with FTSE creates a truly global index leader, with a highly complementary fit of products and distribution capabilities and a unique position as a leader in major domestic market benchmarks as well as international equities,” Mr. Brennan said.
