MSCI, a global provider of investment decision support tools and RiskMetrics Group, a provider of risk management and corporate governance products and services to the global financial community, have entered into a definitive merger agreement whereby MSCI will acquire RiskMetrics in a cash transaction valued at approximately $1.55bn.
The transaction will unite the brands like MSCI, Barra and RiskMetrics to create a global, research-based, client-centric organization, dedicated to delivering investment decision support tools to financial institutions globally. The combined company would have approximately $750m of revenues and approximately 2,000 employees across 20 countries.
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 for senior secured credit facilities aggregating up to $1.375bn, 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.
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 $50m in cost synergies from duplicate areas such as platforms, services and offices.
In connection with the transaction, Ethan Berman, the CEO 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.
Henry Fernandez, chairman and CEO of MSCI, said: “This deal marks a significant milestone in our effort to become the leading provider of investment decision support tools. 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.
“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.”
Ethan Berman, CEO of RiskMetrics Group, said: “This transaction with MSCI will benefit our investors, clients and employees. Our clients will greatly benefit from the combined company’s expanded product range and enhanced risk management offerings.”
However, the closing of the merger is expected to occur in MSCI’s third fiscal quarter of 2010, subject to certain customary conditions.