IHS in €5bn Markit deal to bulk up in financial services

IHS, which provides data analysis for energy and automotive companies, has agreed to acquire London-based Markit to bulk up in financial services.

IHS shareholders will get about 57% of the enlarged company and stockholders of Markit — which is being valued at about $5.5bn (€4.9bn) through the deal — will get the rest, according to a statement.

The tie-up, which will be called IHS Markit, would have $3.3bn in revenue based on 2015 results.

IHS publishes information for industries including finance, aerospace, automakers, energy and technology.

Markit compiles indices for financial products, including credit-default swaps.

Data, index, and over-the-counter trading businesses are becoming sought-after assets at a time when increasing competition has made exchange-traded products such as stocks less profitable.

In December, Intercontinental Exchange spent more than $5bn buying Interactive Data Holdings, a bond-pricing service.

“Everyone expects this area to be high growth in terms of revenue,” said Hirander Misra, chief executive of futures platform Global Markets Exchange Group International.

Regulations since the 2008 financial crisis have pushed over-the-counter trading away from banks onto electronic platforms. That has fragmented markets.

“It gets harder to value and price things. That’s good for data companies,” Mr Misra said.

The combined company will be based in the UK rather than the US, where IHS is based.

While the deal is not technically a tax-reducing event known as an inversion — because IHS’s shareholders would own less than 60% of the new firm — it has all the hallmarks of one, said Robert Willens, a corporate tax and accounting expert in New York.

IHS forecast an adjusted tax rate about 20% to 25% for the new corporation. Mr Willens said this estimate is “likely high”.

The new company would be able to take advantage of tax strategies to shift US earnings overseas while keeping debt in the US, he said.

The structure will also make it possible for the company to access foreign cash that IHS has stockpiled without paying US taxes.

“As more of these get done, other companies are going to feel competitive pressure to do the same. If you’re in the same industry as a company that’s done one of these, you’ve got a problem if you don’t do one,” said Mr Willens.