Consolidation in the data business is accelerating, drawing the attention of watchdogs concerned about the influence of a shrinking group of providers
Consolidation in the data business is accelerating, drawing the attention of watchdogs concerned about the influence of a shrinking group of providers © Bloomberg

S&P Global has agreed to buy analytics group IHS Markit in a $44bn deal that will create a data and information powerhouse able to compete with Bloomberg, the market leader.

The largest deal of 2020 will give S&P Global, best known for its rating agency, a data provider that supplies financial information to 50,000 customers across business and governments.

It is the US group’s most substantial effort to create a financial information juggernaut and the latest in a string of deals in the sector, with consolidation driven by the need to offer services ranging from data provision to trading.

Under the terms of the all-share agreement announced on Monday, S&P Global will pay 0.28 of its own stock for each IHS Markit share. The deal will give S&P Global shareholders almost 68 per cent of the combined company.

Before Monday’s deal, the most notable financial data deal had been the London Stock Exchange’s $27bn purchase last year of Refinitiv, best-known for its Eikon terminals. That was followed this summer by New York Stock Exchange owner Intercontinental Exchange’s purchase of US mortgage data provider Ellie Mae for $11bn. IHS Markit itself was forged from the $13bn merger of IHS and Markit only four years ago.

Shares in IHS Markit jumped 7 per cent to $99.40 in early morning trading on Wall Street, while S&P Global’s stock climbed 2.2 per cent to just over $349.

The combination of S&P Global and IHS Markit, which is expected to generate $11.6bn in annual revenue, is likely to attract significant regulatory scrutiny from watchdogs concerned about the influence of a shrinking group of data providers.

LSE’s deal with Refinitiv has faced intense scrutiny in Brussels, signalling that regulators will subject any new large transactions to lengthy probes and force possible divestitures.

By combining the two businesses, S&P Global, which has a market value of $82bn, said it planned to generate $480m of annual cost savings, as well as $350m of cross-selling opportunities. Some of the savings will be reinvested into improving technology, as the new group laid out plans to invest $1bn a year in that area.

“Through this exciting combination, we are able to better serve our markets and customers by creating new value and insights,” said Douglas Peterson, chief executive of S&P Global, who will lead the combined group.

IHS Markit chairman and chief executive Lance Uggla, who owns a stake in the group worth about $20m, will stay on for a year as a special adviser and is expected to leave after that.

A former trader who founded Markit in 2003, Mr Uggla is set to receive almost $46m thanks to change-of-control clause in his contract, according to a regulatory filing. The rest of IHS Markit’s top management will earn about $70m from the deal if they leave after it closes.

London-based IHS Markit had been considered a potential takeover target since the LSE bought Refinitiv. A senior Wall Street banker said a rival bid should not be ruled out as the likes of ICE have long been considered a potential buyer of IHS Markit.

Dealmakers have become more comfortable with big transactions in recent months, emboldened by positive news of a Covid-19 vaccine and the end of the US election.

S&P Global had been exploring options to bolster its data business since it bought SNL Financial for $2.2bn in 2015, said a person with knowledge of the matter.

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