S&P Global to buy IHS Markit for $44bn

February 2021 | DEALFRONT | MERGERS & ACQUISITIONS

Financier Worldwide Magazine

February 2021 Issue

Business information provider S&P Global Inc has agreed to acquire IHS Markit in an all-stock deal worth $44bn, including $4.8bn of net debt.

Under the terms of the deal, which has been unanimously approved by the board of directors of both companies, 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 approximately 67.75 percent of the combined company on a fully diluted basis, while IHS Markit shareholders will own approximately 32.25 percent.

The deal, which is expected to complete in the second half of 2021, subject to customary closing conditions and regulatory approval, sees S&P pay a hefty premium for the IHS business. The deal’s value translates to about 10 times IHS’s revenue in the last full financial year and 28.2 times earnings before interest, taxes, depreciation and amortisation (EBITDA), according to Bloomberg.

The deal is one of the largest of 2020. It will give S&P Global, best known for its rating agency, a data provider that supplies financial information to 50,000 customers across business and governments.

Douglas Peterson, president and chief executive of S&P Global, will serve as chief executive of the combined company. Lance Uggla, chairman and chief executive of IHS Markit, will stay on as a special adviser to the company for one year following closing. The combined company will be headquartered in New York.

The companies said the merger will generate annual free cash flow exceeding $5bn by 2023, allowing them to invest more than $1bn in technological advances. Artificial intelligence and machine learning have become increasingly important to the financial information services industry in recent years, and it is expected that S&P will continue to invest in these areas going forward. S&P said it planned to generate $480m of annual cost savings, as well as $350m of cross-selling opportunities by combining the companies.

“Through this exciting combination, we are able to better serve our markets and customers by creating new value and insights,” said Mr Peterson. “This merger increases scale while rounding out our combined capabilities, and accelerates and amplifies our ability to deliver customers the essential intelligence needed to make decisions with conviction. We are confident that the strengths of S&P Global and IHS Markit will enable meaningful growth and create attractive value for all stakeholders. We have been impressed by the IHS Markit team and look forward to welcoming the talented IHS Markit employees to S&P Global.”

“This transaction is a win for both IHS Markit and S&P Global as we leverage our respective strengths in information, data science, research and benchmarks,” said Mr Uggla. “Our highly complementary products will deliver a broader set of offerings across multiple verticals for the benefit of our customers, employees and shareholders. Our cultures are well aligned, and the combined company will provide greater career opportunities for employees. We look forward to bringing together our teams to realize the potential of this combination.”

The deal is the latest chapter in the consolidation of the financial information services industry. In 2019, the London Stock Exchange Group Plc agreed to acquire financial data provider Refinitiv from buyout firm Blackstone Group Inc and Thomson Reuters Corp for $27bn.

Though S&P Global and IHS Markit believe there is very little cross over between their two companies, the deal is expected to be subjected to considerable scrutiny by antitrust regulators, particularly in light of the attention the LSE/Refinitiv deal attracted, most notably in the European Union (EU). The LSE was negotiating with EU regulators into December over its deal for Refinitiv, with competition authorities expressing concerns over how some companies’ control of data can make them gatekeepers for an industry.

IHS Markit was formed in 2016 when US company IHS bought British rival Markit for around $6bn.

Richard Summerfield