Information providers Markit and IHS are to combine in an all-share merger that will create a $13bn group in the business of offering financial and corporate data.
Shareholders in US-based IHS, which is best known for its energy market data, will own 57 per cent of the combined company, while investors in London-based Markit, which sells financial data to banks, will hold the remainder.
The merger, unveiled on Monday, is the latest in a flurry of transactions in the financial information and data analytics sector, which has seen a series of deals in recent years as companies look to cash in on the soaring value of proprietary content.
Among the big acquisitions recently, Bloombergbought Barclays’ index benchmarking business for about £520 million and Intercontinental Exchange (ICE), the US exchanges operator, bought Interactive Data Corporation, a valuer of illiquid over-the-counter instruments, for $5.2bn.
The deal is constructed as an all-share merger that will combine IHS’s capitalisation of $7.5 billion with Markit’s $5.2 billion equity valuation. IHS shareholders will receive 3.5566 common shares in IHS Markit for each share they own. The calculations are based on Friday’s closing IHS price of $110.71 and implies a price of $31.13 per Markit share, a 5.6 per cent premium to where it traded at the end of last week.
It will also allow IHS to move its corporate tax base to London, the city where Markit was founded in 2001 by a group of former credit derivatives traders at TD Securities, including current Markit chief executive Lance Uggla.
The manoeuvre, known as a tax inversion, has been a feature of the boom in mergers and acquisitions activity over the last 24 months but is politically sensitive in the US as it allows the acquiring company to capture a lower tax rate. IHS said some key operations would remain in Englewood, Colorado, where it is at present based. The anticipated tax rate is in the “low-to-mid 20 per cent range”, the companies said. Cost savings are estimated to be $125 million.
Jerre Stead, IHS chief executive, will become chairman and chief executive of IHS Markit. Mr Uggla will serve as president and then will take both those roles at the start of 2018 when Mr Stead, who will be 75 years old, retires. A new 11-member board will include six IHS representatives and five from Markit.
People close to the matter said recently that Markit was trumped at the last minute in the $5 billion auction for IDC by ICE.
“At the heart of our shared vision is the opportunity to offer our customers a broader and richer content set through both existing and new products that will support their critical decision making and manage regulatory change,” said Mr Uggla.
The deal will significantly expand Markit, which floated on Nasdaq in June 2014. Its shares have risen nearly 10 per cent during its life as a public company.
Copyright The Financial Times Limited 2016
