US data provider S&P Global Inc is acquiring London-based counterpart IHS Markit in a US$44 billion merger that could put pressure on smaller rivals to follow suit in the highly competitive market.
The boards of both companies have unanimously approved the all-stock deal, they announced jointly in a statement on November 30.
The merger “combines a valuable collection of highly complementary assets in attractive growth markets and critical capabilities that position our organisation for ongoing innovation”, according to S&P Dow Jones Indices Chief Executive Officer Dan Draper.
“Combining S&P Global and IHS Markit businesses will enable us to serve a greater set of needs and customised solutions across our customers, including the potential to link and create value from disparate data sets,” Mr. Draper says in a note to clients on December 1.
He says it will help the data provider expand its data and indexing capability, especially in the fixed income and multi-asset segments.
Although S&P Global is likely to remain the third-largest financial data provider after Bloomberg LP and Refinitiv, the merger puts the company in a stronger position to compete, according to a fund manager at a Malaysian asset management company.
He says it puts pressure on rivals, especially smaller ones such as Moody’s Corp and Factset Research Systems Inc, to follow a similar route.
“In this highly-competitive business, scale is everything. It allows you to reach out to a wider group of clientele, and to offer them more products. I won’t be surprised if other rivals, especially the smaller ones, start doing the same next year,” the Kuala Lumpur-based fund manager tells Asia Asset Management, speaking on condition of anonymity.
According to IHS Markit Chief Executive Officer Lance Uggla the merger creates “a heavyweight in the increasingly competitive market in financial information”.
“The deal also highlights the growing importance of big data in financial markets governed by information-hungry trading algorithms,” Mr. Uggla told employees in a statement on November 30.
Under the terms of the merger, each share of IHS Markit common stock will be exchanged at a fixed 0.2838 ratio of S&P Global common stock. IHS Markit shareholders will own approximately 32.25% of S&P Global when the deal is completed.
The companies have to now obtain US and European regulatory approvals and get the go-ahead from their shareholders, with the entire process expected to take six to nine months.
Suppliers of financial market data generated $32 billion of revenue in 2019, Reuters reported on November 1, citing data from market research firm Burton-Taylor. Bloomberg had a 32.8% share and Refinitiv, 21.4%, well ahead of S&P Global’s 6% and IHS Global’s 2%.