Markit and IHS Sign Agreement for Combined Merger worth $13 Billion
Data provider IHS announced a $13 billion merger that would make it the latest U.S. company to move its headquarters overseas, where it would face lower taxes.
IHS Markit Resources
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IHS Markit (Nasdaq: INFO) is a world leader in critical information, analytics and expertise to forge solutions for the major industries and markets that drive economies worldwide. The company delivers next-generation information, analytics and solutions to customers in business, finance and government,…
- Company Quicklook
An equity deal that values Markit at roughly $5.9 billion has been reached where business research provider IHS Inc, listed under ticker IHS.N, will acquire nearly 57% of the newly combined company, bringing the merger value to just over $13 billion between the newly combined businesses.
The remaining pro-forma ownership will be 43% held by Markit, with 5 of the 11 combined board positions.
This is according to a definitive agreement signed by the companies and announced jointly today, whereby the combined companies will be rebranded as IHS Markit.
IHS has nearly $2.2 billion in revenue and 9,000 employees, whereas Markit has $1.1 billion and 4,200 staff, for comparison.
The news follows after Markit announced an acquisition earlier this month, as covered by Finance Magnates after the company introduced its MarkitSERV FX broker affirmation service on March 15th.
The deal will be accretive to combined adjusted earnings and expected to bring combined free cash flow to $900 million during 2017.
Shares of Markit under ticker MRKT.O last traded at just under $30.00 per share, reflecting that the deal implied market price of $31.13 per share and a premium above last Friday’s closing price on the NYSE.
Renaming as IHS Markit
Commenting in the joint press release, IHS Chairman and CEO Jerre Stead said: “This transformational merger brings together two information-rich companies to create a powerful provider of unique business intelligence, data and analytics to a broad and complementary customer base.”
“IHS Markit and its shareholders will benefit from enhanced product innovation to deliver strong returns across economic cycles. Importantly, the two companies are values-based organizations that have a strong cultural fit which focuses on customer satisfaction and colleague success.”
Markit Chairman and CEO Lance Uggla added in the announcement: “This is an exciting transaction for customers, employees and shareholders of IHS and Markit. Together, we will create a global information powerhouse and a platform for innovation that drives future revenue.
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. The combination will enhance cash flow and enable stronger returns of capital to shareholders.”
Mr. Uggla is expected to assume the role of president and a member of the board for the new merger of equals, whereas Mr. Stead will become chairman and CEO until his planned retirement on December 31st 2017, whereupon he will be succeeded by Mr. Uggla who will take the helm as both CEO and Chairman after Mr. Stead retires.
IHS Earnings Call
The transaction is expected to close by the second half of 2016, based on regulatory and shareholder approval, and will be a fully taxable transaction for IHS U.S. shareholders to enable the offsetting of capital losses against capital gains. A conference call was held today at 8am EST to discuss the news, and coinciding with the IHS Q1 earnings call.
Shortly after publication, during the above-mentioned conference call, one of the repeated highlights made was how Markit and IHS have many common customer relationships, yet, without product overlap, and thus creates an opportunity to cross-sell existing client’s without conflict.
Source: Finance Magnates
IHS and Markit to Merge, Creating a Global Leader in Critical Information, Analytics and Solutions
Combined company creates a global information powerhouse with leading positions in energy, financial services and transportation, serving a world-leading customer base with the opportunity to deliver a broader set of next-generation solutions across industries
Immediately accretive to combined adjusted earnings; expected combined free cash flow of more than $900 million in 2017
Significant value creation through clearly identified cost synergies of $125 million and revenue opportunities of $100 million
$1 billion share repurchase program in each of 2017 and 2018
IHS and Markit today announced the signing of a definitive agreement under which the companies will combine in an all-share merger of equals to create a global leader in critical information, analytics and solutions.
Based on the closing prices of IHS and Markit common stock on March 18, 2016, the implied equity value of the transaction is more than $13 billion.
The transaction has been unanimously approved by the Board of Directors of each company.
Upon completion of the merger, the combined company will be renamed IHS Markit and will be headquartered in London and have certain key operations based in Englewood, Colorado. IHS shareholders will own approximately 57 percent and Markit shareholders will own approximately 43 percent of the combined company on a fully diluted basis. IHS shareholders will receive 3.5566 common shares of IHS Markit for each share of IHS common stock, which based upon the IHS closing price of $110.71 on March 18, 2016, implies a per share price of Markit common shares of $31.13.
IHS Markit will be a leader in critical information, analytics and solutions, and will have non-overlapping customers and products, a strong financial profile and a world-class management team. The company will also deliver next-generation information and analytics products to help customers improve decision making. IHS Markit will have more than 50,000 key customers, including 75 percent of the Fortune Global 500, creating significant cross-selling opportunities across multiple commercial industries and governments.
The combined company’s reported results for fiscal year 2015 include approximately: $3.3 billion in revenue, $1.2 billion in adjusted earnings before interest, taxes depreciation and amortization (EBITDA), and $800 million in free cash flow.
Jerre Stead, IHS Chairman and Chief Executive Officer, said, “This transformational merger brings together two information-rich companies to create a powerful provider of unique business intelligence, data and analytics to a broad and complementary customer base. IHS Markit and its shareholders will benefit from enhanced product innovation to deliver strong returns across economic cycles. Importantly, the two companies are values-based organizations that have a strong cultural fit which focuses on customer satisfaction and colleague success.”
Lance Uggla, Chairman and Chief Executive Officer of Markit, said, “This is an exciting transaction for customers, employees and shareholders of IHS and Markit. Together, we will create a global information powerhouse and a platform for innovation that drives future revenue. 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. The combination will enhance cash flow and enable stronger returns of capital to shareholders.”
Compelling Strategic and Financial Rationale
- Creates a global information platform across industries withleading positions in energy, financial services and transportation. Thecombined company will create a platform for innovation and new productdevelopment to drive future revenue growth.
- Combination of commercial, operational and structural synergieswill result in approximately 20 percent adjusted diluted EPS growth in2017. The transaction is expected to be immediately accretive toadjusted diluted EPS, with mid-teens accretion in 2018. The newcompany expects to realize cost synergies of $125 million by year-end2019. Cost synergies are expected to be driven by integratingcorporate functions, reducing technology spend by optimizing ITinfrastructure, using centers of excellence in cost-competitivelocations, and optimizing real estate and other costs. IHS Markitanticipates an adjusted effective tax rate in the low- to mid-20percent range.
- Strong balance sheet with financial flexibility and meaningfulcapital returns. IHS Markit will have a capital policy with atarget leverage ratio of 2.0 to 3.0 times. The new company willexecute $1 billion of share repurchases in each of 2017 and 2018.
- High recurring revenue generation drives new product investments. IHSMarkit anticipates the combination will deliver approximately $100million of run rate revenue opportunities by fiscal year 2019. IHSMarkit’s subscription-based model will generate approximately 85 percent in recurring revenues, providing predictability and stability.
- Complementary and broad customer base leads to the opportunity tocross sell. IHS and Markit have deep, non-overlapping seniorrelationships across corporate, government, financial services andconsumer customers. There will be significant opportunities to offer amore diverse product set to a broader combined customer base.
- World-class management team with track record of driving valuecreation through successful M&A integration. IHS and Markiteach have a proven track record in mergers and acquisitions andintegration and have started developing plans to ensure seamlessintegration of the two companies.
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