S&P Plans to Acquire IHS Markit
The acquisition should deliver a modest premium to IHS Markit shareholders.
We plan to lift our valuation of wide-moat IHS Markit (INFO) to around $99 per share from $73 after the company announced that wide-moat S&P Global (SPGI) has agreed to acquire it in an all-stock deal. Both firms’ boards of directors have unanimously approved the transaction, and IHS Markit shareholders stand to own just less than a third of the combined entity.
We believe the deal, valued at $44 billion, affords IHS Markit investors a modest premium despite our view that S&P’s shares were trading somewhat rich before the news ($276 fair value estimate for the acquirer). Our new valuation, about 35% higher than our prior fair value estimate, will be based on S&P shares’ current trading price, to reflect the market value of the consideration offered for IHS Markit. However, as our stand-alone valuation of the target remains near its prior level (likely to rise to $74 per share from $73 to reflect the time value of money, but otherwise unchanged) and considering our fair value estimate of S&P, we believe the deal offers holders of IHS Markit looking to stay in the combined entity a roughly 6% premium at the announced ratio. That premium is not far from their shares’ appreciation (off what we believe was an already-elevated level) after the transaction was announced.
The management teams expect the transaction to close in the second half of 2021. We anticipate the deal will be consummated as announced. We see little chance of an alternative suitor emerging, particularly considering the magnitude of the transaction, and similarly do not anticipate insurmountable regulatory pushback, though the incoming Biden administration’s antitrust team is still being formed and could require selective concessions in areas of overlap between the two firms’ financial services offerings.
IHS Markit is a collection of relatively wide moat data-driven businesses with a highly recurring revenue model. Its revenue consists of 41% financial services, 27% transportation, 21% resources, and 11% consolidated markets & solutions or CMS. IHS Markit’s unique data complements S&P Market Intelligence. IHS Markit’s indexes business, which includes iBoxx (fixed income) and iTraxx (credit default swap), expands on S&P Dow Jones Indices. IHS Markit’s resources business expands S&P Platts’ with additional price reporting (through IHS Markit’s OPIS benchmarks) as well as energy data and analytics.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Zain Akbari does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.