European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

New York-based <a href="https://www.smartkarma.com/entities/s-p-global-inc" target="_blank" data-smartkarma-citation="entities:9735:1" rel="noopener">S&amp;P Global Inc. (SPGI US)</a> has agreed to acquire London-based <a href="https://www.smartkarma.com/entities/ihs-markit-ltd" target="_blank" data-smartkarma-citation="entities:26496:1" rel="noopener">IHS Markit Ltd (INFO US)</a>, at an EV of $44.5 bn, including $4.8 bn of net debt.
<ul>
<li>The operation, advanced on 30 November by The Wall Street Journal, was later confirmed by the parties involved.</li>
<li>
All-stock deal: 0.2838 SPGI x 1 INFO.
<ul>
<li>equivalent to $96.94 per share of INFO upon announcement; this values the equity of INFO at $39.3 bn.</li>
<li>This represents 9.9x EV/ Forward Revenue, 22.8x EV/ Forward EBITDA and 32.8x P/Forward E.</li>
</ul>
</li>
<li>This deal is one of the biggest deals of the year in M&amp;A. It will have a huge impact in the financial sector: it will create a financial information giant capable of competing with Bloomberg and Refinitiv. Wall Street does not believe that the end of the coronavirus pandemic will cause subscriptions to data providers to plummet. Shares of S&amp;P Global and IHS Markit have risen between 78% and 100% from their respective lows in March.</li>
<li>The decline in the number of companies in the data market should be of concern to both customers and regulators. That said, management did not contemplate significant regulatory hurdles to the deal.</li>
</ul>
S&amp;P, whose businesses include credit rating, financial markets data, Platts energy data and its famous indices, has an operating margin of 56%. IHS Markit is less profitable, but its EBITDA margin is quite good, 40%.
Pro-forma M&amp;A model suggests acquisition may be accretive to EPS since as early as 2021.
I believe the deal should enhance SPGI's position as a proprietary data and solutions provider, while also reducing the company's sensitivity to Ratings.
<ul>
<li>The timing seems positive as Capital IQ consensus forecasts organic growth at IHS Market to accelerate in 2021 (6.8% revenue growth in 2121 and 6.3% in 2022), while SPGI faces a softer issuance outlook (3% revenue growth in 2021 and 5.8% in 2022, according to Capital IQ consensus).</li>
<li>Overall, while there is a strong strategic rationale behind the deal, there is also increased complexity which may weigh on SPGI.</li>
</ul>
The gross spread is currently 2.7% for a deal that it is highly likely to close. I recommend setting up the spread in the usual way.

New York-based S&amp;P Global Inc. (SPGI US) has agreed to acquire London-based IHS Markit Ltd (INFO US), at an EV of $44.5 bn, including $4.8 bn of net debt.

The operation, advanced on 30 November by The Wall Street Journal, was later confirmed by the parties involved.

All-stock deal: 0.2838 SPGI x 1 INFO.

equivalent to $96.94 per share of INFO upon announcement; this values the equity of INFO at $39.3 bn.
This represents 9.9x EV/ Forward Revenue, 22.8x EV/ Forward EBITDA and 32.8x P/Forward E.


This deal is one of the biggest deals of the year in M&amp;A. It will have a huge impact in the financial sector: it will create a financial information giant capable of competing with Bloomberg and Refinitiv. Wall Street does not believe that the end of the coronavirus pandemic will cause subscriptions to data providers to plummet. Shares of S&amp;P Global and IHS Markit have risen between 78% and 100% from their respective lows in March.
The decline in the number of companies in the data market should be of concern to both customers and regulators. That said, management did not contemplate significant regulatory hurdles to the deal.

S&amp;P, whose businesses include credit rating, financial markets data, Platts energy data and its famous indices, has an operating margin of 56%. IHS Markit is less profitable, but its EBITDA margin is quite good, 40%.
Pro-forma M&amp;A model suggests acquisition may be accretive to EPS since as early as 2021.
I believe the deal should enhance SPGI's position as a proprietary data and solutions provider, while also reducing the company's sensitivity to Ratings.

The timing seems positive as Capital IQ consensus forecasts organic growth at IHS Market to accelerate in 2021 (6.8% revenue growth in 2121 and 6.3% in 2022), while SPGI faces a softer issuance outlook (3% revenue growth in 2021 and 5.8% in 2022, according to Capital IQ consensus).
Overall, while there is a strong strategic rationale behind the deal, there is also increased complexity which may weigh on SPGI.

The gross spread is currently 2.7% for a deal that it is highly likely to close. I recommend setting up the spread in the usual way.

Financials & FinTech research, Galliano’s Financials Research

Victor Galliano

Financials & FinTech research

Financials & FinTech, EM & Developed Markets

Galliano’s Financials Research

Galliano's Financials Research provides fundamental research in Emerging Markets financials, including FinTech, as well as financials in select Developed Markets.

The investment style applied is generally value oriented, although Growth At Reasonable Price (GARP) strategies can also be used where appropriate. 

Our investment research approach aim is often contrarian, looking to capitalise on overly sceptical or optimistic consensus views. In terms of valuation techniques, the focus is on PBV ratio to ROE, PE multiples and dividend yield, as well as the application of PEG ratios and, where appropriate, Sum of the Parts (SOTP) valuations.

<ul>
<li>S&amp;P Global <a href="https://www.smartkarma.com/entities/s-p-global-inc" target="_blank" data-smartkarma-citation="entities:9735:1" rel="noopener">Mcgraw Hill Financial (SPGI US)</a> is offering USD44bn for <a href="https://www.smartkarma.com/entities/ihs-markit-ltd" target="_blank" data-smartkarma-citation="entities:26496:1" rel="noopener">IHS Markit Ltd (INFO US)</a>, in an all share deal, equivalent to 10x IHS revenues</li>
<li>The offer represents, in our view, M&amp;A with clear economies of scale in the data provider space that we estimate would create the largest player by revenue, bigger than Bloomberg, and provide big potential for cost synergies</li>
<li>We believe that there are three core hurdles to this M&amp;A deal; we see the revenue synergies as ambitious, that the premium offered to IHS's pre-offer market value seems modest and potential regulatory hurdles to the S&amp;P-IHS combination</li>
<li>In our view, this deal reflects that data providers are looking to protect their turf from other potential acquisitive “big data” players, as we see in earlier deals by exchanges ICE and LSE</li>
<li>On the back of synergy gains and market growth, we would recommend investors to go long SPGI; we believe that the cost synergies plus partial revenue synergies are deliverable</li>
<li>Key risks to the deal and our positive view include; A higher bid for IHS from a competitor to SPGI or another big data player in the exchange sector, for example; A major regulatory hurdle, in the form of a lengthy review on anti-competition grounds; The deal goes through, but the extraction of synergies is more modest than anticipated leading to limited returns uplift</li>
</ul>


S&amp;P Global Mcgraw Hill Financial (SPGI US) is offering USD44bn for IHS Markit Ltd (INFO US), in an all share deal, equivalent to 10x IHS revenues
The offer represents, in our view, M&amp;A with clear economies of scale in the data provider space that we estimate would create the largest player by revenue, bigger than Bloomberg, and provide big potential for cost synergies
We believe that there are three core hurdles to this M&amp;A deal; we see the revenue synergies as ambitious, that the premium offered to IHS's pre-offer market value seems modest and potential regulatory hurdles to the S&amp;P-IHS combination
In our view, this deal reflects that data providers are looking to protect their turf from other potential acquisitive “big data” players, as we see in earlier deals by exchanges ICE and LSE
On the back of synergy gains and market growth, we would recommend investors to go long SPGI; we believe that the cost synergies plus partial revenue synergies are deliverable
Key risks to the deal and our positive view include; A higher bid for IHS from a competitor to SPGI or another big data player in the exchange sector, for example; A major regulatory hurdle, in the form of a lengthy review on anti-competition grounds; The deal goes through, but the extraction of synergies is more modest than anticipated leading to limited returns uplift


S&P Global (NYSE SPGI) & IHS Markit (NYSE:INFO) – Challenges and Potential Big Data Deal Structure

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

In our Macro Overview of Global fund positioning, we cover the following: <ul>
<li>Managers raise EMEA Overweight, hit max underweight in US.</li>
<li>Taiwan key beneficiary of COVID rebalance, India sees outflows.</li>
<li>Cross country exodus seen in Financials/Energy.  Materials reverse long-term decline.</li>
<li>Active managers move towards defensive and secular growth sectors and out of cyclicals.</li>
<li>UK Energy stocks see decline, Dutch Tech stocks continue to attract new investment.</li>
</ul>Taken from our Global fund analysis, covering 391 active global funds with combined AUM of $800bn.

In our Macro Overview of Global fund positioning, we cover the following: 
Managers raise EMEA Overweight, hit max underweight in US.
Taiwan key beneficiary of COVID rebalance, India sees outflows.
Cross country exodus seen in Financials/Energy.  Materials reverse long-term decline.
Active managers move towards defensive and secular growth sectors and out of cyclicals.
UK Energy stocks see decline, Dutch Tech stocks continue to attract new investment.
Taken from our Global fund analysis, covering 391 active global funds with combined AUM of $800bn.

Global Equity Positioning:  Macro Overview.  Raising EU Overweights, Taiwan Vs India, UK Decouples

Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

Our base case continues to be for near-term consolidation while the market determines the implications of states’ reopening (i.e., the “wait-and-see” phase). Until this consolidation period resolves below support or above resistance we are maintaining a relatively neutral stance considering the wide range of outcomes. Many major indexes are testing logical resistance and until we see breakouts it is hard to get too bullish. In this report we highlight attractive stocks from a RS perspective.

Our base case continues to be for near-term consolidation while the market determines the implications of states’ reopening (i.e., the “wait-and-see” phase). Until this consolidation period resolves below support or above resistance we are maintaining a relatively neutral stance considering the wide range of outcomes. Many major indexes are testing logical resistance and until we see breakouts it is hard to get too bullish. In this report we highlight attractive stocks from a RS perspective.

U.S. Equity Strategy: Round Trip Back To Resistance

Founder and Strategist, Entext Economics & Strategy

Sean Maher

Founder and Strategist

Entext Economics & Strategy

Entext provides institutional investors with distinctive, actionable asset allocation and thematic research, which typically challenges the market consensus. Our clients range from credit, equity and multi-asset hedge and pension funds to family offices and sovereign funds. 
 
We focus on identifying key inflection points in macro data and relative asset performance amid the 'groupthink'  and confirmation bias that characterizes most investment bank analysis.

Macro Driven Investment Insight

Thematic (Sector/Industry)

<ul>
<li>The Republican replacement for ‘Obamacare’ has been announced and looks an incoherent mess – resurgent healthcare inflation will be a drag on discretionary spending.</li>
<li>The US yield curve is flattening, overall bank credit growth has been negative for two months and yesterday’s January consumer lending data was about half consensus expectations.</li>
<li>The global mining sector has been selling off as expected with iron ore/copper prices – I remain tactically short the FTSE 350 mining index.</li>
<li>Overall, the US…</li>
</ul>


The Republican replacement for ‘Obamacare’ has been announced and looks an incoherent mess – resurgent healthcare inflation will be a drag on discretionary spending.
The US yield curve is flattening, overall bank credit growth has been negative for two months and yesterday’s January consumer lending data was about half consensus expectations.
The global mining sector has been selling off as expected with iron ore/copper prices – I remain tactically short the FTSE 350 mining index.
Overall, the US…


US Healthcare Overhaul Stumbling, Singapore Cyclical Rally Looking Premature

United States

S&P Global Inc. provides clients with financial information services. The Company offers information regarding ratings, benchmarks, and analytics in the global capital and commodity markets. S&P Global operates worldwide.

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S&P Global (SPGI US)

Financial Data Juggernaut

The deal should enhance SPGI's position as a proprietary data and solutions provider. Gross spread is currently 2.7%. I recommend setting up the...

Jesus Rodriguez Aguilar

S&P Global (NYSE SPGI) & IHS Markit (NYSE:INFO) – Challenges and Potential Big Data Deal Structure

In a climate of “big data” mergers, the rationale for the SPGI-IHS merger is strong, with a relatively low overlap on product offerings whilst...

Victor Galliano

Global Equity Positioning: Macro Overview. Raising EU Overweights, Taiwan Vs India, UK Decouples

In our Macro Overview of Global fund positioning, we cover the following: Managers raise EMEA Overweight, hit max underweight in US. Taiwan key...

Steven Holden

U.S. Equity Strategy: Round Trip Back To Resistance

Our base case continues to be for near-term consolidation while the market determines the implications of states’ reopening (i.e., the...

Vermilion Research

US Healthcare Overhaul Stumbling, Singapore Cyclical Rally Looking Premature

The Republican replacement for ‘Obamacare’ has been announced and looks an incoherent mess – resurgent healthcare inflation will be a drag on...

Sean Maher

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