Citi has said the reported acquisition of Octus, a sub-investment grade credit data provider, makes strong strategic sense for London Stock Exchange Group, even as the news wiped around $3.8 billion from the company's market capitalisation.
LSEG confirmed on 13 October that it is exploring a deal, with the Financial Times reporting a valuation of around $3.5 billion.
Citi says the transaction could be funded with cash while still allowing £2 billion of share buybacks in 2027, keeping leverage within the middle of the company's target range.
The strategic appeal centres on strengthening LSEG's data franchise in private markets, where growth is strong and limited transparency creates greater scope to monetise proprietary data.
Revenue synergies are expected to come primarily from scaling distribution of Octus data across LSEG's existing customer base.
The deal would also give FTSE Russell, LSEG's index business, the building blocks to develop private credit indices.
Citi is relaxed about the market's concern over data pricing power, which it believes is driving the share price reaction.
On that point, LSEG's data business currently trades at around 10 times consensus price-to-earnings, a significant discount to rival FactSet at 13 to 14 times, a gap Citi views as unwarranted.
