IHS (NYSE: IHS) and Markit (NASDAQ: MRKT) announced the signing of a definitive agreement under which the companies will combine in an all-share merger of equals to create a global leader in critical information, analytics and solutions. Based on the closing prices of IHS and Markit common stock on March 18, 2016, the implied equity value of the transaction is more than $13 billion. The transaction has been unanimously approved by the Board of Directors of each company.

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

• Creates a global information platform across industries with leading positions in energy, financial services and transportation. The combined company will create a platform for innovation and new product development to drive future revenue growth.
• Combination of commercial, operational and structural synergies will result in approximately 20 percent adjusted diluted EPS growth in 2017. The transaction is expected to be immediately accretive to adjusted diluted EPS, with mid-teens accretion in 2018. The new company expects to realize cost synergies of $125 million by year-end 2019. Cost synergies are expected to be driven by integrating corporate functions, reducing technology spend by optimizing IT infrastructure, using centers of excellence in cost-competitive locations, and optimizing real estate and other costs. IHS Markit anticipates an adjusted effective tax rate in the low- to mid-20 percent range.
• Strong balance sheet with financial flexibility and meaningful capital returns. IHS Markit will have a capital policy with a target leverage ratio of 2.0 to 3.0 times. The new company will execute $1 billion of share repurchases in each of 2017 and 2018.
• High recurring revenue generation drives new product investments. IHS Markit anticipates the combination will deliver approximately $100 million of run rate revenue opportunities by fiscal year 2019. IHS Markit’s subscription-based model will generate approximately 85 percent in recurring revenues, providing predictability and stability.
• Complementary and broad customer base leads to the opportunity to cross sell. IHS and Markit have deep, non-overlapping senior relationships across corporate, government, financial services and consumer customers. There will be significant opportunities to offer a more diverse product set to a broader combined customer base.
• World-class management team with track record of driving value creation through successful M&A integration. IHS and Markit each have a proven track record in mergers and acquisitions and integration and have started developing plans to ensure seamless integration of the two companies.

Governance

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.

Transaction Details

• Headquarters: IHS Markit will be headquartered in London and have certain key operations based in Englewood, Colorado.
• Closing and Approvals: The transaction is expected to close in the second half of 2016, subject to customary closing conditions, including regulatory approvals and approval by both IHS and Markit shareholders. This will be a fully taxable transaction for IHS U.S. shareholders which will allow the ability to offset capital losses against capital gains.
• Advisors: IHS legal advisor is Weil, Gotshal & Manges LLP and its lead financial advisor is M. Klein and Company and its other financial advisor is Goldman, Sachs & Co. Markit’s legal advisor is Davis Polk & Wardwell LLP and its financial advisor is J.P. Morgan Securities LLC.

Conference Call and Webcast Information

IHS and Markit senior management will conduct a conference call and webcast to discuss this news release today, March 21, 2016 at 8:00 a.m. Eastern Daylight Time as part of the IHS first quarter 2016 earnings call. To hear the live event, visit the IHS or Markit websites at http://investor.ihs.com/ and http://www.markit.com/Company/Investors and log in at least 15 minutes prior to the start of the webcast.