S&P Global has agreed to buy IHS Markit for about $39 billion in stock, a deal that accelerates the wave of consolidation among the finance industry's biggest data providers.
S&P is offering 0.2838 shares for each IHS Markit share, representing a premium of about a 4.7% to IHS Markit's last close, according to a statement Monday. After the deal, S&P shareholders will own approximately 68% of the combined company, which will be led by S&P's Chief Executive Douglas Peterson.
The deal marries S&P, one of the most famous names in financial markets, with a research company that supplies forecasts to most of the world's biggest companies as well as pricing for bonds and credit default swaps. The combination creates a challenger to the London Stock Exchange Group, which last year agreed to acquire Refinitiv for $27 billion, as financial firms are locked in a race for scale to meet surging demand for data and analytics in increasingly computerized financial markets.
"This is a huge consolidation of financial databases and services," said Gary Dugan, chief executive of the Global CIO Office, an investment firm in Singapore. "S&P probably gathered that expansion incrementally wouldn't work and instead has gone for a major acquisition, which will deepen their product range and relevance."
Bloomberg LP, the parent of Bloomberg News, competes with IHS Markit and S&P Global in providing financial analytics and information.
Shares of S&P Global and IHS Markit have more than tripled over the past five years, providing ample currency for dealmaking. The average premium for major takeovers announced globally this year was about 27%, according to data compiled by Bloomberg.
The deal would be the world's second-largest acquisition of 2020, second only to the $56 billion set of transactions among China's biggest oil and gas companies to sell their pipeline networks to a new national carrier, according to data compiled by Bloomberg.
The transaction has an enterprise value of about $44 billion including S&P's assumption of $4.8 billion in net debt. Lance Uggla, CEO of IHS Markit, will stay on as a special adviser to the company for one year after the deal is closed.
Markit was founded in a U.K. barn by Uggla, a Canadian who spotted an opportunity to provide pricing for the opaque world of credit default swaps just as trading of the derivatives was taking off in the early 2000s. Uggla built up the company through a breakneck series of acquisitions, culminating in the 2016 merger with IHS. A 2014 IPO of Markit valued it at about $4.5 billion. The company has more than 5,000 analysts, data scientists, financial experts and industry specialists.
Regulatory scrutiny could pose one risk for the tie-up, given the overlap between the firms' data offerings, according to Craig A. Huber, founder of Huber Research Partners LLC. The LSE is still negotiating with European Union regulators over its deal for Refinitiv, with competition authorities expressing concerns over how some companies' control of data can make them gatekeepers for an industry.
"Antitrust could be an issue since both are market data providers," said Jin Rui Oh, director at United First Partners, an investment and advisory group that specializes in special situations. "That could be a little tricky."
