The London Stock Ex­change (LSE) Group, Friday said it would raise 938 million pounds ($1.6 billion) to fund the acquisition of U.S. indexes group, Frank Russell.
LSE will offer 74,347,813 new shares at a price of 1,295 pence, a 30.1 per cent discount to its Aug. 21 closing price.
The new ordinary shares rep­resent 27.3 per cent of the exist­ing share capital and would be 21.4 per cent of the enlarged is­sued share capital following the rights issue.
Europe’s oldest independent bourse unveiled plans to buy Frank Russell for $2.7 billion in June to move deeper into the U.S. financial services market. LSE said then it would help fund the purchase by issuing new stock.
The deal would give LSE third place in the booming market for exchange traded funds (ETFs), low-cost funds that provide an alternative to active fund manage­ment, behind market leaders S&P Dow Jones and MSCI (MSCI.N).
The rights issue has been fully underwritten by Barclays Bank, RBS Capital Markets, Deutsche Bank, JP Morgan Cazenove, Ban­ca IMI, Banco Santander, HSBC and Mitsubishi UFJ Securities.
LSE will pay the remaining $1.1 billion for Frank Russell with its existing multi-currency bank debt facilities. They include a recently signed 600-million-pound multi-currency revolving credit facility which has an initial two-year term.
The deal, which is expected to boost earnings in the first full year after the merger, will create an in­dex compiler with some $9.2 tril­lion of assets benchmarked against the performance of its market measures, which include the UK’s FTSE 100 .FTSE.
The London Stock Exchange said it intends to continue paying dividends on a progressive basis following the Frank Russell acqui­sition, with future payments adjust­ed to take account of the increased number of shares.
Russell, founded in 1936 and based in Seattle, owns an index di­vision that operates equity bench­mark gauges, such as the Russell 2000 Index, and an investment management arm with assets un­der management of $256 billion.
The deal is due to be completed by the end of the year, after which Russell Chief Executive Len Bren­nan will join LSE’s executive com­mittee.
LSE reported a 36 per cent in­crease in operating profits to 102 million pounds in the three months through June 30 while revenues climbed 20 percent to 300 million pounds.

LSE unveils $1.6bn rights issue for US acquisition