S&P Global to buy IHS Markit for roughly $44 billion

S&P Global has agreed to buy IHS Market for about $44 billion. Yahoo Finance’s Myles Udland, Brian Sozzi and Julie Hyman share the details

Video Transcript

JULIE HYMAN: We also have the largest deal of the year yet being announced. Today, S&P Global is going to be buying IHS Markit for about $44 billion. It's an all stock deal here. And again as I mentioned, it's the largest of the year, which is interesting. We've got a premium being paid for IHS Markit. And this is really all about data. These are two data powerhouses, S&P Global obviously. Also the company behind the S&P Dow Jones Indices, both of these companies monitor an enormous amount of information on the economy, on the financial world, then they sell that information to the financial world as well. So as we look at this deal and sort of what it means, Brian Sozzi I know that you have been watching this. And it does seem to indicate the sort of power of data, particularly in this environment.

BRIAN SOZZI: Very much so, Julie. And you pay a premium for data. We've seen this countless times in this space. I think what you're seeing is S&P realizing that it needs a more complete product offering to go to a lot of institutions and even expand out of the financial services sector. So this is a very powerful combination, the ability to take what S&P does and what IHS does, package that up and go to market with one really bigger products week can be very compelling.

And financially, there's a lot of synergies here. Really, over probably close to $500 million in annual synergies S&P is estimating as part of this deal going forward. Now, this does put the ball in turn back in FactSet. If you're FactSet, which competes for S&P and IHS, what do you do this morning? That company was rumored to be on the sales block a few months ago. What is your morning looking like over there at FactSet?

MYLES UDLAND: You know, I think this deal is such an interesting way to maybe frame a second derivative of how important financial markets are all around us, right? I mean, you look at the stock performance of S&P over the last five years, not only is the stock up 250% some odd, the S&P is up 70% over that period. We've also seen IHS market shares outperform the market quite nicely. That stock's up more than 200% over the last couple of years.

Julie Hyman, as you know, as an alum of Bloomberg, the value of data for investors and also as a-- I don't know, maybe it's a way to get a sense of how financialized is the economy really, right? The more that people are willing to pay for data, the more the financialization of the economy, I suppose, becomes confirmed or reaffirmed, however you want to say that. And I think, again, because it kind of is a sort of sleepy-ish business, tracking all the stuff that happens in markets.

But I don't think anybody who is looking at the space and watching how S&P has performed, especially after the Mcgraw-Hill breakup a few years back and kind of splitting those two units apart has any misconceptions about just how much investors are willing to pay for this. And we talk a lot about you know SaaS, this, that, the other, big data. Well, here in market is the big data sitting right in front of us, right? It might be harder to get your head around what is the Oracle have on the Cloud, right? But I think you go to Yahoo Finance, you're getting a pretty good entry level view at what's there for financial markets. And clearly it's tens of billions of dollars worth.

BRIAN SOZZI: Miles, really important point you mentioned there on SaaS. I know you love the SaaS business models. S&P estimates after this deal closes, close to 80% of the business will be recurring revenue. That's a really good place to be.

JULIE HYMAN: It is a really good place to be. We should mention as well, S&P is getting IHS for a little less now than it would have a few months ago. And that's because a decent chunk of IHS's businesses is energy companies, they sell their data to energy companies. So does S&P for that matter. But energy companies because they've been hit during this pandemic, because some of the other clients have been hit, the stock took a hit back in September. So in this case when you talk about synergies, when you talk about bigger is better, in this case it does seem to be that being more diversified and larger should provide some level of insulation against individual sector showing some weakness. So we'll see how that plays out as we do come out of the pandemic.