Information and analytics provider IHS Inc. and market-data firm Markit Ltd. said Monday they will merge, a so-called inversion deal that will create a data heavyweight based in London.
The deal joins a wave of inversions that have taken place recently, where a U.S. firm buys a foreign company and moves headquarters to a lower tax jurisdiction, typically by merging with a smaller foreign firm.
After Monday’s deal, shareholders of IHS, which has a market value of about $7.5 billion as of Friday’s close, will own about 57% of the combined company. Shareholders of London-based Markit, which had a value of roughly $5.2 billion, will own about 43% of the firm. The new company will be based in London and have “certain key operations” in Englewood, Colo., IHS’s home.
The companies said they posted a combined $3.3 billion in revenue and $1.2 billion in adjusted earnings before interest, taxes depreciation and amortization in fiscal 2015.
The companies said they are expecting a corporate tax rate in the low to mid-20 percent range. That’s far lower than the 35% tax rate U.S. corporations pay.
Corporate tax inversions fell out of favor in 2014 after the U.S. Treasury Department instituted a series of rules that made it less profitable for American firms to move overseas. The Obama administration portrayed companies leaving the U.S. as bad corporate citizens.
The government’s move at that time managed to kill several deals, including a more than $50 billion deal by U.S. pharmaceutical firm AbbVie Inc. to buy Irish drug company ShirePLC.
Still, tax inversion deals have continued. More recently, the inversion issue has come up again in the U.S. presidential election. Last week, presidential candidate Bernie Sanderssent a letter to Treasury Secretary Jack Lew asking him to make it harder for U.S. companies to invert overseas. He specifically called out Pfizer Inc.’s proposed merger with Allergan PLC.
IHS and Markit said they have already identified cost savings of $125 million and revenue opportunities $100 million.
Launched in a barn more than a decade ago by former TD Securities credit-trading executive Lance Uggla, Markit aggregates data from major bond dealers that are used for research, valuation, trading, and reporting about derivatives, bonds, loans and currencies. Over its short life, the London-based company has become an important provider of data to Wall Street.
Englewood-based IHS provides analytics for businesses and governments in more than 140 countries. Founded in 1959, it went public in 2005 and has about 9,000 employees in 32 countries.
WSJ.com By Anne Steele and Shayndi Raice