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Rating:MSCI Seals a $1.5 Billion Deal Not Rated 0.0 Email Routing List Email & Route  Print Print
Monday, March 01, 2010

MSCI Seals a $1.5 Billion Deal

Reported by InvestmentWires Staff, 

MSCI is buying RiskMetrics Group for $1.5 billion in a deal expected to close in the third quarter.

The deal comes three months in the wake of RiskMetric's purchase of KLD Research & Analytics.
Company Press Release

New York – March 1, 2010 – MSCI Inc. (NYSE: MXB), a leading global provider of investment decision support tools, and RiskMetrics Group, Inc. (NYSE: RISK), a leading provider of risk management and corporate governance products and services to the global financial community, jointly announced today that they have entered into a definitive merger agreement whereby MSCI will acquire RiskMetrics in a cash and stock transaction valued at $21.75 per share based on MSCI’s closing price of $29.98 per share on Friday, February 26, 2010, or approximately $1.55 billion.

The transaction will unite two market leaders and powerful brands including MSCI, Barra, and RiskMetrics, to create a global, research-based, client-centric organization, dedicated to delivering world class investment decision support tools to financial institutions worldwide. The combined company would have approximately $750 million of revenues and approximately 2,000 employees across 20 countries.

MSCI’s offer consists of $16.35 in cash and 0.1802 shares of MSCI per share of RiskMetrics. The transaction is subject to customary closing conditions, including approval by the shareholders of RiskMetrics, the receipt by MSCI of the proceeds of the debt financing for the transaction, antitrust clearance and other customary regulatory approvals. The transaction is currently expected to close in MSCI’s third fiscal quarter of 2010.

The transaction is expected to be financed by existing cash and proceeds of debt. MSCI has received a commitment letter from Morgan Stanley Senior Funding, Inc. for senior secured credit facilities aggregating up to $1.375 billion, which would be available, subject to customary conditions, to fund the cash consideration in the acquisition, the refinancing of existing senior secured credit facilities of MSCI and RiskMetrics and the ongoing working capital needs of MSCI and its subsidiaries following the transaction.

“This deal marks a significant milestone in our effort to become the leading provider of investment decision support tools,” said Henry Fernandez, Chairman and CEO, MSCI Inc. “The combined scale, complementary product capabilities and clients and extensive geographic footprint of MSCI and RiskMetrics will drive significant cost-saving synergies and revenue opportunities. RiskMetrics is the perfect match for MSCI and we are very excited to welcome them to the MSCI family.”

“One of the key trends that has been driving the growth of our analytics business is the increased need to understand, measure, manage, and report risk. The combination of MSCI’s expertise in portfolio equity risk models and analytics, and RiskMetrics’ powerful multi-asset class risk management platform creates a comprehensive, best of breed portfolio risk management offering, which will provide our clients with a seamless view of risk across the front and middle office,” added Mr. Fernandez.

“This is a truly powerful combination. This transaction with MSCI will benefit our investors, clients and employees,” said Ethan Berman, Chief Executive Officer of RiskMetrics Group. “Managing risk is critically important in today’s financial markets. Our clients will greatly benefit from the combined company’s expanded product range and enhanced risk management offerings.”

The combined company will have an attractive growth profile with a diversified revenue base, consisting predominantly of recurring revenues. The strong cash flow and financial position of the combined company should also facilitate further investment throughout the business in terms of products, people and processes, reinforcing the company’s well-established position within and across its clients’ investment processes. In addition, the transaction is expected to accelerate MSCI’s internal investment spending program, including the build-out of MSCI’s portfolio management tools for fixed income managers and further investment in financial indices, and creates the opportunity for an estimated USD 50 million in cost synergies from duplicate areas such as platforms, services and offices.

Approvals and Anticipated Closing

The Boards of Directors of both companies have approved the transaction. The closing of the merger is expected to occur in MSCI’s third fiscal quarter of 2010, subject to certain customary conditions, including approval by RiskMetrics’ stockholders, the receipt by MSCI of the proceeds of the debt financing for the transaction, and the receipt of antitrust clearance and other customary regulatory approvals. In connection with the transaction, Ethan Berman, the Chief Executive Officer of RiskMetrics Group, and certain other RiskMetrics shareholders, have entered into a voting agreement with MSCI pursuant to which they have agreed to vote, in the aggregate, approximately 54% of the outstanding RiskMetrics shares in favor of this transaction.

Advisors

Morgan Stanley served as MSCI’s financial advisor, Davis Polk & Wardwell LLP provided legal counsel to MSCI and UBS provided a fairness opinion to MSCI’s Board of Directors. Morgan Stanley is also providing committed financing in connection with the transaction. RiskMetrics’ financial advisor was Evercore Group, L.L.C., and it was advised on legal matters by Kramer Levin Naftalis & Frankel LLP.
 

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