![](https://a673b.bigscoots-temp.com/wp-content/uploads/2020/04/imageForEntry25-RpI.jpg)
S&P Global Inc. (NYSE: SPGI) and IHS Markit Ltd. (NYSE: INFO) announced Monday that the two firms have reached a definitive all-stock merger agreement that values IHS Markit at an enterprise value of $44 billion, including $4.8 billion in net debt. Shareholders in London-based IHS Markit will receive a fixed ratio of 0.2838 shares of S&P Global for each share of IHS Markit they own.
When the deal is completed (currently expected in the second half of next year), current S&P Global shareholders will own about 67.75% of the combined company and IHS Markit shareholders will own the rest.
At Friday’s closing price of $92.58, IHS Markit had a market cap of $35.9 billion. Excluding net debt, the transaction values the firm at $39.2 billion. The agreed price reflects a premium of around 6.2% to IHS Markit shareholders.
S&P Global CEO Douglas Peterson commented: “This merger increases scale while rounding out our combined capabilities, and accelerates and amplifies our ability to deliver customers the essential intelligence needed to make decisions with conviction.” S&P Global’s businesses include financial information and services including ratings and indexes (the S&P 500, for one) and commodity and energy brand S&P Global Platts. Peterson will be the CEO of the combined company.
Lance Uggla, board chair and CEO of IHS Markit, will remain with the company for one year as a special adviser. Uggla noted: “Our highly complementary products will deliver a broader set of offerings across multiple verticals for the benefit of our customers, employees and shareholders.” IHS Markit was created in 2016 by a merger between Colorado-based IHS and London-based Markit. One of the company’s flagship events is the annual IHS CERAWeek global energy conference.
The combined company expects to have 76% recurring revenue and realize annual balanced growth of 6.5% to 8% in 2022 and 2023. The new firm is targeting 200 basis points of annual EBITA margin expansion and expects to deliver annual cost savings of around $480 million.
According to the announcement, the combined firm expects to generate free cash flow of more than $5 billion by 2023 while targeting a dividend payout ratio of 20% to 30% of adjusted diluted earnings per share (EPS)and a targeted capital return of at least 85% of free cash flow from dividends and share buybacks.
IHS Markit currently pays a dividend yield of 0.73% and S&P Global pays a yield of 0.78%. Diluted EPS in the 2019 fiscal year totaled $0.0012. S&P Global’s diluted EPS in 2019 totaled $0.0086.
IHS Markit shares traded up about 3.8% in Monday’s premarket at $96.06, above the 52-week range of $44.81 to $95.05. The consensus price target on the stock is $87.88, and the company pays an annual dividend of $0.68 per share.
S&P Global shares traded down nearly 2%, at $334.91 in a 52-week range of $186.06 to $379.87. The consensus price target on the stock is $386.92, and the firm pays an annual dividend of $2.68.
ALERT: Take This Retirement Quiz Now (Sponsored)
Take the quiz below to get matched with a financial advisor today.
Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.
Here’s how it works:
1. Answer SmartAsset advisor match quiz
2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.
3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future
Take the retirement quiz right here.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.