Credit ratings giant S&P Global reached an all-stock deal to buy IHS Markit for $44 billion, creating a massive enterprise to produce data and analytics used by Wall Street, the companies announced Monday.
The merger will create a $126-billion financial services behemoth that will be headquartered in New York.
The firms said joining forces will bolster offerings to investor clients and provide complementary information streams in growth areas, such as in the shifts towards renewable energy and environmental, social and governance (ESG) investing.
The deal, one of the biggest transactions of the year, aims to capitalize on the growth in demand for good data among institutional investors who increasingly rely on algorithmic and high-frequency trading.
Douglas Peterson, the chief executive of S&P Global and the CEO of the combined company, said buying IHS Markit provided an opportunity to “leapfrog and accelerate and actually be transformative in providing data and analytics” to areas of rising investor interest.
Peterson told analysts in a conference call that the companies already have identified ways to combine data sets and technology and predicted more benefits would be discovered once they actually combine.
Originally founded in 1860, S&P is best known for its Dow and S&P 500 stock market indices and for its credit ratings business.
London-based IHS Markit is known for its purchasing manager surveys that are an advance indicator of economic activity, as well as its military and security information subsidiary Jane’s Information Group. The company was formed in a 2016 merger between IHS and Markit.
S&P shareholders will own nearly 68 percent of the new company, and analysts say the deal with S&P Global provides a five percent premium to IHS Markit’s share price prior to the transaction.
The firms said they expect the merger to generate some $680 million in cost savings by the end of the fifth full year after closing, which is expected in the second half of next year.
Peterson said both companies brought key energy data tools and products that should lead to revenue growth as investment grows in climate-friendly energy.
He also highlighted improved capacities to evaluate private companies for mergers or go-public transactions.
The deal will add four IHS Markit directors to S&P Global’s 13-member board of directors.
Peterson will serve as CEO of the combined company, while IHS Chief Executive Lance Uggla will stay on for one year as a special advisor following the closing of the deal, which is expected in the second half of 2021.
Uggla said on the conference call that he was convinced that combining provided the best way forward and that “both sets of shareholders are better off together than either is on our own.”
Uggla said he plans to remain a long-term shareholder of the combined company once he exits.
Shares of IHS Markit jumped 7.5 percent to $99.48 in afternoon trading, while S&P Global gained 1.6 percent to $347.09.
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