'Obsolete' Refinitiv technology needs 'redo' - former LSE chief

Xavier Rolet, who ran the exchange for almost a decade until his departure in 2017, said his former employer’s efforts to win competition clearance for the deal could go either way.

The biggest challenge for Refinitiv’s new owner would be overhauling its technology, which was built from “a collection of acquisitions over several decades”, he told The Telegraph. “The technology is entirely [in need of] a redo.”

LSE announced in August that it had clinched an all-share deal to take over Refinitiv, owned by private equity investors led by Blackstone and Thomson Reuters.

David Schwimmer, the exchange’s current boss, said the transaction could help the firm to reduce its reliance on share trading and new company listings by increasing its earnings from information and data.

However, Rolet warned of possible pitfalls. “If they pull it off, [I take] my hat off to the management team and David. It would be a masterstroke,” he said.

“But equally, it could go the other way, because Thomson has a specific reputation.”

Chunks of the business were high-end and required a lot of manual support, making it difficult to cut costs, he added.

“It’s certainly been a fantastic deal for Blackstone,” Rolet said. The US firm bought 55 per cent of Thomson Reuters’ financial and risk division, formerly the terminals and data business of Reuters, in 2018 less than a year before selling the re-branded business to LSE. The 2018 transaction was reported to value the business at around $20 billion.

Some Refinitiv divisions, such as foreign exchange, are no longer growing, said Rolet. Its Eikon terminals business is based on an “obsolete model” and may need to be sold or run as part of a joint venture, he said.

The terminals are the main competitor to those sold by Bloomberg.

“The Eikon business was never considered as a success, in fact, considerably worse by the industry,” Rolet told The Telegraph. “And that’s something they will probably have to get rid of.”

The LSE formally requested European competition law clearance two weeks ago. The European Commission is due to give approval, impose conditions or launch an in-depth review by 22 June.

Rolet said the review “could go any way” due to the political nature of the process. “In my experience, the competition review in Brussels is run very, very politically. There are obviously a lot of technical aspects... but the political element in the end trumps everything and that’s just the way Brussels is run,” he added.

Rolet said the deal had attractions as well as dangers. “There’s no rewards without risks,” he said.

The Telegraph said an LSE spokesman declined to comment. ■