Upon completion of the merger, the combined company will be renamed IHS Markit and will be headquartered in London and have certain key operations based in Englewood, Colorado. IHS shareholders will own approximately 57 percent and Markit shareholders will own approximately 43 percent of the combined company on a fully diluted basis. IHS shareholders will receive 3.5566 common shares of IHS Markit for each share of IHS common stock, which based upon the IHS closing price of $110.71 on March 18, 2016, implies a per share price of Markit common shares of $31.13.
IHS Markit will be a leader in critical information, analytics and solutions, and will have non-overlapping customers and products, a strong financial profile and a world-class management team. The company will also deliver next-generation information and analytics products to help customers improve decision making. IHS Markit will have more than 50,000 key customers, including 75 percent of the Fortune Global 500, creating significant cross-selling opportunities across multiple commercial industries and governments.
The combined company’s reported results for fiscal year 2015 include approximately: $3.3 billion in revenue, $1.2 billion in adjusted earnings before interest, taxes depreciation and amortization (EBITDA), and $800 million in free cash flow.
Jerre Stead, IHS Chairman and Chief Executive Officer, said, “This transformational merger brings together two information-rich companies to create a powerful provider of unique business intelligence, data and analytics to a broad and complementary customer base. IHS Markit and its shareholders will benefit from enhanced product innovation to deliver strong returns across economic cycles. Importantly, the two companies are values-based organizations that have a strong cultural fit which focuses on customer satisfaction and colleague success.”
Lance Uggla, Chairman and Chief Executive Officer of Markit, said, “This is an exciting transaction for customers, employees and shareholders of IHS and Markit. Together, we will create a global information powerhouse and a platform for innovation that drives future revenue. At the heart of our shared vision is the opportunity to offer our customers a broader and richer content set through both existing and new products that will support their critical decision making and manage regulatory change. The combination will enhance cash flow and enable stronger returns of capital to shareholders.”
Compelling Strategic and Financial Rationale
The combination will be a merger of equals. Mr. Stead will assume the role of Chairman of the Board of Directors and Chief Executive Officer of IHS Markit. Mr. Uggla will be President and a member of the Board of Directors.
Mr. Uggla will assume the role of Chairman of the Board of Directors and Chief Executive Officer of IHS Markit upon Mr. Stead’s retirement on December 31, 2017.
The Board of Directors of the combined company will be comprised of 11 members, with IHS designating six members (including the chairman) and Markit designating five members (including the lead director) from their current boards.
A copy of the investor presentation will be made available on both companies’ investor relations websites.
IHS (NYSE: IHS) is the leading source of insight, analytics and expertise in critical areas that shape today’s business landscape. Businesses and governments in more than 140 countries around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS is committed to sustainable, profitable growth and employs nearly 9,000 people in 32 countries around the world.
Markit is a leading global provider of financial information services. We provide products that enhance transparency, reduce risk and improve operational efficiency. Our customers include banks, hedge funds, asset managers, central banks, regulators, auditors, fund administrators and insurance companies. Founded in 2003, we employ over 4,200 people in 13 countries. Markit shares are listed on NASDAQ under the symbol MRKT.
IHS, Markit, and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding IHS’s directors and executive officers, and their direct or indirect interests in the transaction, by security holdings or otherwise, is contained in IHS’s Form 10-K for the year ended November 30, 2015, and its proxy statement filed on February 24, 2016, which are filed with the SEC. Information regarding the directors and executive officers of Markit, and their direct or indirect interests in the transaction, by security holdings or otherwise, is contained in Markit’s 20-F for the year ended December 31, 2015, and Markit’s proxy statement filed on Form 6-K on March 27, 2015, which are filed with the SEC. A more complete description will be available in the registration statement on Form F-4 and the joint proxy statement/prospectus.
Adjusted EBITDA for IHS
Adjusted EBITDA is equal to EBITDA, which is defined as net income plus or minus net interest, plus provision for income taxes, depreciation, and amortization, and further excludes primarily non-cash items and other items that we do not consider to be useful in assessing our operating performance (e.g., stock-based compensation expense, restructuring charges, acquisition-related costs, asset impairment charges, gain or loss on sale of assets, gain or loss on debt extinguishment, pension mark-to-market and settlement expense, and income or loss from discontinued operations).
The following table reconciles IHS profit for the period from continuing operations to our Adjusted EBITDA for the periods presented:
|Provision for income taxes||48,853|
|Amortization related to acquired intangible assets||130,122|
|Stock-based compensation expense||128,916|
|Impairment of assets||1,243|
|Loss on sale of assets||-|
|Loss on debt extinguishment||-|
|Pension mark-to-market and settlement expense||2,492|
|Income from discontinued operations, net||(51,255)|
Adjusted EBITDA for Markit
Adjusted EBITDA is defined as profit for the period from continuing operations before income taxes, net finance costs, depreciation and amortisation on fixed assets and intangible assets (including acquisition related intangible assets), acquisition related items, exceptional items, share based compensation and related items, net other gains or losses, including Adjusted EBITDA attributable to joint ventures and excluding Adjusted EBITDA attributable to non-controlling interests.
The following table reconciles Markit’s profit for the period from continuing operations to our Adjusted EBITDA for the period presented:
|($ in millions)||
For the year ended
December 31, 2015
|Profit for the period||152.1|
|Income tax expense||70.0|
|Finance costs – net||18.9|
|Depreciation and amortisation – other||107.0|
|Amortisation – acquisition related||63.7|
|Acquisition related items||4.2|
|Share based compensation and related items||50.8|
|Other (gains) / losses – net||(13.7)|
|Share of results from joint venture not attributable to Adjusted EBITDA||(2.4)|
|Adjusted EBITDA attributable to non-controlling interests||(2.4)|
Free Cash Flow for IHS
Free cash flow is defined as net cash provided by operating activities less capital expenditures.
The following table reconciles IHS net cash generated by or used in operating activities to free cash flow.
|Net cash generated by operating activities||612.6|
|Capital expenditures on property and equipment||(122.9)|
|Free cash flow||489.7|
Free Cash Flow for Markit
Free cash flow is defined as net cash generated by or used in operating activities, less capital expenditure, purchases of property, plant and equipment and intangible assets. The following table reconciles Markit's net cash generated by or used in operating activities to free cash flow.
|Net cash generated by operating activities||405.6|
Purchases of property, plant and equipment
|Purchases of intangible assets||(100.5||)|
|Free cash flow||288.5|
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