The business of supplying data and information for banks, wealth and asset managers, insurers and brokers is intensifying. The organizations have announced a $44 billion merger deal.
The market for financial information of the sort used by wealth managers is heating up. New York-listed S&P Global has agreed to buy IHS Markit, another US-listed firm, in an all-stock deal valuing the latter at $44 billion.
The deal will create an enlarged entity that will go up against the likes of Refinitiv and Bloomberg, among others.
The deal includes $4.8 billion of net debt, the parties said in a statement today. There had been media speculation that such a transaction would be announced today.
Each share of IHS Markit common stock will be exchanged for a fixed ratio of 0.2838 shares of S&P Global common stock. Upon completion of the transaction, current S&P Global shareholders will own about 67.75 per cent of the combined company on a fully diluted basis, while IHS Markit shareholders will own around 32.25 per cent, S&P Global said in a statement.
To put the enterprise value figure in context, IHS Markit chalked up revenue of $3.18 billion for the first nine months of 2020, down by 3 per cent year-on-year, and delivered net attributable income of $719 million, surging by 140 per cent on a year earlier. (That figure was affected by a gain of about $372 million related to the sale of a business line.) Adjusted EBITDA was $1.371 billion, a 3 per cent gain. Free cash-flow - $664.6 million - dropped by 20 per cent.
As a result of the deal, S&P Global is obtaining technology outlets such as the IHS Markit Data Lake, adding to S&P Global’s Kensho offering (an AI startup that it bought about two years ago).
The market for business information and financial data is intense. In 2019, the London Stock Exchange Group made a $27 billion bid to buy Refinitiv. (Refinitiv will be familiar to wealth managers for offerings such as its Eikon range of capabilities that cover cross-asset data and news, analytics and reporting tools. Another of its offerings is Compliance Management, a solution on its Connected Risk platform.) Rising competition comes at a time when cost pressures are all too often upwards, partly due to rising regulatory loads stemming from laws such as Europe’s MiFID II or Dodd-Frank in the US. Also, the trend for environmental, social and governance-driven investment (ESG), and the need to understand supply chains more thoroughly post-COVID-19, has boosted data demand. At the same time, such data has to be easily digested by wealth managers.
Media reports said the transaction will be scrutinized by competition regulators, concerned that the market for financial data is getting overly concentrated.
“Serving a global customer base across financial information and services, ratings, indices, commodities and energy, and transportation and engineering, the pro forma company will provide differentiated solutions important to the workflows of many of the world's leading companies,” S&P Global said.
“The transaction creates a pro forma company with increased scale, world-class products in core markets and strong joint offerings in high-growth adjacencies, including private assets, small and medium enterprises, counterparty risk management, supply chain and trade and alternative data. Combined, the two companies will provide comprehensive solutions across data, platforms, benchmarks and analytics in ESG, climate and energy transition,” it continued.
Douglas Peterson, president and chief executive of S&P Global, will serve as CEO of the combined company. Lance Uggla, chairman and CEO of IHS Markit, will stay on as a special advisor to the company for one year following closing.