By Cara Lombardo And Liz Hoffman
S&P Global Inc. agreed to acquire IHS Markit Ltd. for about
$44 billion, the companies said Monday, a landmark deal that would
combine two of the largest providers of data to Wall Street.
The all-stock deal is the largest of the year. IHS Markit, based
in London, had a market value of about $37 billion before the deal
was announced; S&P's was about $82 billion.
The companies said IHS Markit shareholders will receive 0.2838
share of S&P Global stock for each IHS share under the
agreement reached. S&P Global shareholders will own
approximately 68% of the combined company.
The Wall Street Journal first reported Sunday that such a deal
was imminent.
The deal would combine one of the oldest names in financial
markets with a relative newcomer. S&P traces its roots to an
1860 compendium of information for railroad investors and is best
known for its bond ratings and its iconic stock-market indexes,
which serve as shorthand for the health of global markets.
IHS Markit, formed in 2016 by the merger of two smaller players,
tracks millions of data points in financial markets. It owns
software that big Wall Street banks use to underwrite corporate
stock and bond offerings, and tracks transportation and energy
data, the latter of which could pair with S&P's commodities
business, Platts.
Financial data has exploded over the past two decades as markets
sped up and computer-driven investment strategies replaced human
stock pickers. The success of Bloomberg LP, which launched in the
1980s offering electronic bond-price quotes, spawned a wave of
competitors seeking market intelligence that could be packaged and
sold to information-hungry investors.
Those players have themselves merged in recent years into a
handful of giants, as data providers such as S&P Global and
FactSet battle it out with big exchanges eager to monetize their
pricing data to offset falling trade commissions.
Blackstone Group Inc. in 2018 bought a majority stake in Thomson
Reuters Corp.'s financial-data arm and a year later agreed to sell
the company, by then rebranded as Refinitiv, to the owner of the
London Stock Exchange.
In 2016, IHS, which provided analytics for businesses and
governments, bought London-based Markit Inc. and moved its domicile
to the U.K. It was part of a wave of such deals, known as
inversions, in which American companies moved overseas to lower
their tax rates.
Markit was founded in 2003 in a barn outside London by former TD
Securities executive Lance Uggla and was backed in its early days
by a group of large banks eager for transparent pricing data in the
opaque world of credit derivatives.
It went public in 2014, raising $1.3 billion in a
larger-than-expected IPO that allowed 12 Wall Street banks
including Goldman Sachs Group Inc. and Bank of America Corp. to
sell portions of their stakes.
Mr. Uggla took over the combined company around the end of 2017
from his counterpart at IHS.
At the time of the merger between IHS and Markit, the two
companies had a combined market value of about $13 billion. Today,
IHS Markit is nearly three times as valuable, a sign of how hot the
market for financial data is.
IHS in late September reported that its third-quarter profit
rose while its revenue fell as its customers -- which include
companies in financial services, transportation and oil and gas --
recovered from the shock of the coronavirus pandemic at varying
speeds. A unit that supplies data to energy companies and one that
sells technical information to product designers, among other
things, were worst hit.
S&P is now bulking up after years of slimming down. The
company in 2011 was spun out of the McGraw Hill publishing
conglomerate and in 2016 sold J.D. Power, the marketing firm known
for its customer-satisfaction rankings, before rebranding from
McGraw Hill Financial.
S&P's revenue rose 9% in the third quarter, rising in all of
its divisions and especially in the ratings business, its largest.
The business has benefited as bond issuance soars with interest
rates at historic lows. Profit fell compared with a year ago.
At $44 billion, S&P's deal for IHS would be the largest of
the year globally, according to Dealogic data, topping both chip
maker Nvidia Corp.'s nearly $40 billion deal to buy chip designer
Arm Holdings. and a roughly $40 billion deal between Nippon
Telegraph & Telephone Corp. and a subsidiary.
Global M&A volume so far this year is running 12% lower
compared with the same period a year earlier, with the U.S. down
28%, after the pandemic forced companies to tend to their own
businesses. Deals dried up in the second quarter but have come
roaring back since late summer, particularly among technology and
health-care companies. As in prior years, technology is by far the
most active sector for M&A, with $669 billion worth of deals so
far.
With the stock market rallying, many acquirers are using their
richly valued shares as currency, prompting a steady stream of
all-stock deals in recent weeks.
The Wall Street Journal reported last week that Salesforce.com
Inc. is in talks to buy Slack Technologies Inc., for more than the
$17 billion market value of the maker of a popular office-chat
app.
Goldman Sachs Group Inc. was financial adviser to S&P Global
and Wachtell, Lipton, Rosen & Katz served as its legal adviser.
Morgan Stanley was financial adviser to IHS Markit and Davis Polk
& Wardwell LLP was its legal adviser.
Write to Cara Lombardo at cara.lombardo@wsj.com and Liz Hoffman
at liz.hoffman@wsj.com
(END) Dow Jones Newswires
November 30, 2020 07:08 ET (12:08 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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