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Nasdaq Issues Notes Worth $500M to Fund eVestment Buyout

Zacks Equity Research

Nasdaq, Inc. NDAQ announced that it will issue $500 million of senior notes due 2019. The offering is anticipated to close by Sep 22, 2017. The interest has been pegged at three-month U.S. dollar LIBOR plus 0.4% per annum.

The company intends to utilize the net proceeds along with cash in hand and borrowings under the company’s senior credit facility or through issuances of commercial paper to finance its eVestment buyout as well as the expenses associated with it.  Nasdaq will also utilize the funds for general corporate purposes if the eVestment acquisition does not materialize. On Sep 5, 2017 Nasdaq had announced that it will acquire eVestment for $705 million. The buyout is expected to culminate in the fourth quarter of 2017.

The approach by Nasdaq to capitalize on the still-low interest rate environment to procure funds appears prudent. Also, this might lower the interest burden on borrowings, facilitating margin expansion.

The company exited the last-reported quarter with its debt balance declining 15% from the 2016-end level. Long-term debt to equity ratio was 0.55 at quarter end, down 1100 basis points. With the new issuance, the long-term debt-to-equity ratio would increase 900 basis points.

With the issuance, the company’s interest burden will increase. However, solid operational performance will help it service debt uninterruptedly. The company has delivered positive surprise in the last three quarters. Notably, the company is focused to de-leverage over the next four quarters with effective capital deployment that in turn will strengthen its balance sheet.


Zacks Rank and Share Price Movement

Nasdaq carries a Zacks Rank #3 (Hold). Shares of the company have underperformed the industry in a year’s time. While Nasdaq’s shares have rallied 9.6%, the industry has registered a gain of 18%. Diversified product offerings and strategic acquisitions should continue to drive the shares higher.

Stocks to Consider

Better-ranked stocks from the finance sector are Atlas Financial Holdings, Inc (AFH), Markel Corporation (MKL) and Mercury General Corporation (MCY), each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Atlas Financial Holdings engages in underwriting commercial automobile insurance policies in the United States. The company delivered positive surprises two out of the last four quarters, with an average beat of 57.94%

Markel Corporation markets and underwrites specialty insurance products in the United States and internationally. The company delivered positive surprises two out of the last four quarters, with an average beat of 21.06%

Mercury General Corporation engages in writing personal automobile insurance in the United States. The company delivered positive surprises in three of the last four quarters, with an average beat of 1.06%. 

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