The parent companies of two significant suppliers of information to the supply chain are merging in the biggest U.S. corporate combination of 2020.
S&P Global and IHS Markit are merging in an all-stock deal valued at approximately $44 billion, the companies announced Monday morning. It is not a merger of equals: The resulting company will be called S&P Global, current S&P Global CEO Douglas Peterson will head the combined entity and existing S&P Global shareholders will own more than two-thirds of what’s coming out of the merger.
Where the deal has potential impact on the supply chain is that it will bring together two suppliers of information under one roof. Panjiva is an S&P Global company that supplies import and export data. S&P Global acquired Panjiva in 2018.
Meanwhile, the Maritime & Trade division of IHS Markit has the venerable Journal of Commerce as its most visible service, but it is also a wide-ranging supplier of information on trade data and movements. It also produces some key industry events, such as the TPM Trans-Pacific conference that like other events has switched to a virtual format for 2021 after a last-minute cancellation in 2020.
(FreightWaves is a competitor to the Journal of Commerce and for many IHS Markit events.)
The impact of a growing supply chain business under the combined entities was briefly mentioned in a conference call the two companies held with analysts Monday morning. Peterson, listing all the areas where he believes the two companies can bring their combined activities together, mentioned the supply chain as one area, and a reference to the supply chain was noted in the call’s slide presentation under a list entitled “combined capabilities enhance pro forma company’s ability to serve high-growth adjacencies.”
IHS also provides a product it calls the “Mobility and Energy Future service,” which focuses on the nexus of energy — where it has a substantial role in consulting activities through its CERA division — and transportation. The capabilities were on display in a roundtable discussion on hydrogen vs. batteries at the company’s most recent giant CERAWeek conference. (Last year’s event was canceled at the last minute and the 2021 event is already scheduled to be virtual.)
The news of the merger started speculation about whether the new company would keep all its businesses or begin to divest some. But this deal does not involve S&P Global taking on a lot of debt to make the acquisition happen, a type of transaction that sometimes requires a subsequent sale of some assets. Instead, it is using its stock as a currency to complete the all-stock merger, and that stock is up almost 32% in the last year and roughly fivefold in the last five years.
Peterson was asked on the call whether divestitures would be considered. He suggested that the caller might be inquiring about the company’s “transportation” business, though it wasn’t precisely clear the full scope of what operations would be under “transportation.”
Regardless, Peterson indicated no support for the idea of divestitures. He said the transportation assets of the combined company are a “powerful part” of the merger of the two firms. He said it is a “high-growth business” and that it is more of a “mobility business.”
“It fits so well with data and analytics that we think there are opportunities to leverage that into the Market Intelligence platform,” he said in reference to the Market Intelligence division of S&P Global, which distributes much of its data through a proprietary platform.
Peterson also said the combined company will be focused on the “energy transition,” which would include the future of metals to produce batteries in electric vehicles. “We think there will be a lot of learning we can provide there” on issues such as battery metals technology.
During the call, both Peterson and IHS Markit CEO Lance Uggla referred several times to Kensho, a leader in the artificial intelligence field that S&P Global invested in early and then acquired several years ago. It was suggested that bringing Kensho’s capabilities to data from IHS Markit, on top of what it already can do with S&P Global data, would provide strong analytical capabilities.
The combination of S&P Global and IHS Markit will also bring together two providers of key benchmarks in energy markets, S&P Global Platts and OPIS, formerly known as the Oil Price Information Service. Platts attempted to acquire OPIS in late 2010. But industry opposition to the largest oil price reporting agency acquiring a smaller competitor — but one that owned key benchmarks in several markets — ultimately scuttled the deal when federal antitrust authorities signaled they were going to take a long look at the combination.
The S&P/IHS Markit merger is not expected to close until the second half of 2021. And while the wording appears to be boilerplate, the prepared statement announcing the combination did say it would need to fulfill a waiting period under the Hart-Scott-Rodino antitrust law, as well as “other antitrust and regulatory approvals.”