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
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.
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.