MARCH 1, 2010,
11:14 A.M. ET
MSCI Agrees to Acquire
RiskMetrics in $1.55 Billion Deal
MSCI Inc. announced plans to buy
RiskMetrics Group Inc. for about $1.55 billion, marrying two of the
largest providers of investment and risk-management tools.
The agreed cash-and-stock deal would combine
MSCI, best known for its equity and bond indexes, with a specialist provider
of analytic tools at a time when regulators are pushing enhanced risk
MSCI Chief Executive Henry Fernandez said the
proposed deal would be earnings-accretive and provide a platform to roll out
products across a range of asset classes to a combined 6,000 or so clients.
The deal "brings us a giant step forward to
offering a seamless view of risk across our clients' investment process," he
said on a conference call.
He added that MSCI had been under "no
competitive pressure" to make a deal with RiskMetrics, and that his company
remains on the lookout for other potential purchases in the index business.
MSCI shares were down 2.3% at $29.29
midmorning. RiskMetrics shares shot 13.96% higher to $21.23.
MSCI's own risk business was loss-making, Mr.
Fernandez said, but had identified synergies from the proposed deal that
would allow it to match the higher margins generated by its core index
RiskMetrics also owns one of the largest
proxy-advisory firms, ISS. Mr. Fernandez described it as "non-core", but
said it would be retained to generate cash.
He said MSCI would be able to roll out
RiskMetrics' products in Asia and develop new benchmarks and indexes, such
as those aimed at the fast-growing "social investment" community.
MSCI is offering a mix of cash and stock that
values RiskMetrics at $21.75 a share, a 17% premium to Friday's closing
price. RiskMetrics shareholders would receive $16.35 in cash and 0.1802 MSCI
share per RiskMetrics share.
The deal is expected to close in late spring
or early summer, pending approval by RiskMetrics shareholders. The combined
company will count $746 million in revenues and employ more than 2,000
people. Ethan Berman, RiskMetrics' CEO, will stay on in a temporary advisory
Mr. Fernandez said MSCI's long-term revenue
growth targets remain in place, though the transaction could accelerate
New York-based MSCI in recent weeks shifted
its attention to acquiring the risk-analysis and investment-research firm
after failing in an effort to possibly acquire Dow Jones & Co.'s index
MSCI, a former unit of Morgan Stanley,
specializes in building market indexes and calculates tens of thousands of
stock real-estate investment-trust indexes daily. It also produces
computerized tools for investors such as pension funds and hedge funds.
The company received a commitment letter from
Morgan Stanley for secured credit facilities of up to $1.38 billion to fund
the cash portion of the deal, and for other purposes.
RiskMetrics put itself on the block in
January and at the time was expected to fetch a premium of about 30% of its
value at the time, which then would have valued the company at about $1.3
billion, according to The Wall Street Journal.
Other interested parties included
private-equity firms and media companies, including Bloomberg, McGraw Hill
Thomson Reuters. Many of the same companies also were believed to be
weighing bids for Interactive Data Corp., a financial-market-data analysis
firm partially owned by
Pearson PLC, owner of the Financial Times.
— Doug Cameron and Jacob
Bunge contributed to this article.
Tess Stynes at
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