According to the US information and analytics provider IHS Inc. and UK market-data company Markit Ltd., they will be merging to establish a $13-billion company, which will be based in London.
With their decision to move to the UK, IHS is taking advantage of their lower corporate tax rate through tax inversion — which is a way for US companies to avoid getting taxed at home. The IHS Markit (new name of the company) expects a corporate tax that is low- to mid- 20 percent range, in comparison to the 35% corporate tax in the US.
The IHS-Markit Deal
The deal struck on Monday was worth approximately $5.8 billion, or $3.13 per share, a 5.6% premium to the closing stock price last Friday.
Soon after the deal was made (which has been expected in the last half of 2016), shareholders of IHS, having a market value of $7.5 billion as of Friday, will own approximately 57 percent of the merged company. Meanwhile, shareholders of UK-based Markit will own about 43 percent of the firm. Although it will be based now in London, the new company will still have some of its key operations at Englewood, Colorado, where IHS is based.
About Markit and IHS
Markit, which started in a bard over 10 years ago by ex-credit trading executive of TD Securities Lance Uggla, collects data from several major bond dealers that are used for trading, valuation, research, and reporting about bonds, currencies, derivatives, and loans. Hence, they have become an important part of Wall Street as they provide pertinent data to them. They were initially backed by several other lenders like Bank of America Corporation, Deutsche Bank AG, Goldman Sachs Group Inc., and J.P. Morgan Chase & Company.
The CEO and the chairman of the merged Firm will be Jerre Stead, the chief executive of IHS, up until his planned retirement by the end of next year (December 31, 2017). Mr. Uggla, on the other hand, will be taking over as CEO after Mr. Stead’s retirement.
The two executives have been part of over 100 mergers and acquisitions for more than 10 years already. They said, they’ve discussed their merger over breakfast in December after being associated by investors in both companies. In early January, the deal had progressed with 21st of March as the deadline for the announcement of their merger.
According to Stead and Uggla, the deal was excellent since their customer bases won’t overlap and it represents an opportunity to merge corporate and financial data. While IHS targets more corporate clients, Markit provides information to asset managers and banks in Wall Street.
“We use content in slightly different ways,” says Mr. Uggla.
IHS offers analytics for governments and businesses in over 140 countries around the world. The company was founded in 1959; however it went public only in 2005 and has approximately 9,000 employees in 32 countries. In the recent years, they have been known for their acquisition deals as they’ve pursued a growth strategy by snapping up information providers and other analytics firms.