PSO Pearson Plc

London Stock Exchange Group PLC (LSE.LN) said Monday that it will buy the remaining 50% stake in FTSE International Ltd. that it doesn't already own for GBP450 million in cash as part of broader moves to diversify its offering

LSE Chief Executive Xavier Rolet was upbeat about taking full ownership of the index business, which it has jointly owned with Pearson for 16 years. "This transaction further delivers on our diversification strategy, expanding LSEG's existing offering deeper into indices, derivatives and market data products and services," he added.

"Immediately earnings-enhancing, we expect this transaction to create long-term value and growth for our customers and shareholders," Rolet said in a statement.

Pearson--which sold its 61% stake in financial market data provider Interactive Data Corp. for $2 billion before tax last year in May--said the LSE deal will strengthen the FT Group's "focus on global business news, analysis and intelligence, increasingly delivered through subscription models and digital channels."

It marks the publisher's exit from companies that are primarily providers of financial data.

Pearson CEO Marjorie Scardino said the LSE deal further strengthens the group's "financial position at a time of significant macroeconomic turbulence."

"We are freeing up capital for continued investment in a proven strategy: becoming more digital, more international and more service-oriented in education, business information and consumer publishing," she said in a separate statement.

The U.K.-based company--which has extensive educational publishing operations and publishes the Financial Times newspaper and Penguin books--plans to use the LSE sale proceeds "to support and accelerate its strategy, investing in its businesses both organically and through acquisitions of companies with complementary content, technology and geographic exposure."

Pearson has made several bolt-on acquisitions over the past 18 months or so, aimed at strengthening its education operations.

Pearson said it expects FTSE to make a total post-tax contribution to its adjusted earnings of approximately GBP18 million, or 2.2 pence a share, in 2011.

In 2010, FTSE reported total revenue of GBP98.5 million and total earnings before interest, tax, depreciation and amortization of GBP40 million. At the end of 2010, FTSE had gross assets of GBP100.8 million.

The LSE expects cost synergies of GBP100 million annually and gross revenue synergies of GBP18 million annually by the end of the third year of full ownership of the FTSE.

The LSE will fund the acquisition from existing resources, but has also secured GBP350 million from several banks "to maintain financial flexibility."

Under the terms of the agreement, the LSE will continue to use the FTSE name. The transaction is expected to close by the first quarter of 2012.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com

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