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S&P Global (SPGI) and IHS Markit Agree on a Mega Merger

Zacks Equity Research
·3 min read

S&P Global Inc. SPGI and IHS Markit INFO yesterday announced that they have entered into a merger agreement.

In a deal that is expected to be completed in the second half of 2020, S&P Global will buy IHS Markit for about $44 billion ($4.8 billion of net debt) in stock. Each IHS Markit share will be exchanged for a fixed ratio of 0.2838 shares of S&P Global.

Post the merger, S&P Global shareholders will own around 67.75% of the combined company on a fully diluted basis and IHS Markit shareholders will own the remaining 32.25%. The move brings together two of the largest data providers to Wall Street.

Notably, both S&P Global and IHS Markit have had an impressive rally on the bourses over the past year. They appreciated a respective 34.2% and 38% compared with 4.9% rally of the industry they belong to and 17.3% growth of the Zacks S&P 500 composite.

Expected Benefits

The buyout is expected to significantly benefit the combined company in terms of scale and business mix, technology and innovation, and customer and talent acquisition. It is anticipated to be accretive to earnings by the end of the second year post-closing, generate 76% recurring revenue and realize 6.5% to 8% annual organic revenue growth in 2022 and 2023.

It will target 200 basis points of annual EBITA margin expansion and expects around $480 million in cost synergies. Annual free cash flow is expected to surpass $5 billion mark by 2023.

Zacks Rank and Stocks to Consider

S&P Global and IHS Markit currently carry a Zacks Rank #3 (Hold).

Some top-ranked stocks in the broader Zacks Business Services sector are Republic Services RSG and Insperity NSP, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1(Strong Buy) Rank stocks here.

Long-term earnings (three to five years) growth rate for Republic Services and Insperity is estimated at 9.4% and 15%, respectively.

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Republic Services, Inc. (RSG) : Free Stock Analysis Report
 
Insperity, Inc. (NSP) : Free Stock Analysis Report
 
S&P Global Inc. (SPGI) : Free Stock Analysis Report
 
IHS Markit Ltd. (INFO) : Free Stock Analysis Report
 
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