Blackstone and Goldman sell data provider for $1.9bn

IHS Markit is to buy Ipreo, a fast-growing data provider, for $1.86bn from Blackstone and Goldman Sachs as part of a broad reboot for its financial services unit.

The UK-based data provider wants to lift organic growth targets at the subsidiary, which provides indices and data for hard-to-value assets and accounts for a third of group turnover.

IHS, which competes with Thomson Reuters and Bloomberg, said on Monday it would also sell its struggling MarkitServ business, which processes derivatives trades.

Blackstone, a US private equity house, and Goldman Sachs Merchant Banking, which manages private capital, jointly bought Ipreo from KKR, another private equity group, for $975m four years ago.

Such groups have sought out assets whose data underpin trading in global markets, because they often generate steady revenues. However, the sector is consolidating because many lack the scale to compete as investors demand more combinations of data.

Blackstone is now shifting its focus in the sector to market and data infrastructure, with its landmark $17bn takeover of the bulk of Reuters’ trading assets.

Ipreo, whose customers include many of the world’s biggest private equity and venture capital companies, is “a perfect strategic fit for us”, said Lance Uggla, chief executive of IHS, told analysts. “It repositions our financial services segment in a faster growing market.”

Ipreo, which made $290m last year, has had a compound annual growth rate of 11 per cent over the past five years.

Mr Uggla forecast the purchase would help increase organic growth at IHS’s financial business from 4-6 per cent a year to 5-7 per cent. The unit grew at only 4 per cent last year.

The Ipreo deal — at an effective 2019 forward adjusted earnings before interest, taxation, depreciation and amortisation ratio of 16 times — would be funded by debt, IHS said, pushing up its leverage ratio to about 3.6 times earnings.

IHS said it would suspend its share buyback programme until debt levels fell back into the company’s target range, probably in late 2019.

The other spur to higher growth would be the sale of its MarkitServ unit, which Mr Uggla had highlighted as a growth market as it prepared for its IPO in 2014.

It processes electronic trades for over-the-counter derivatives and foreign exchange deals, but it had negative organic revenue growth in 2016 and 2017 due to lower credit volumes.

“MarkitServ’s prospects are best served by combining them with other post trade processing businesses,” Mr Uggla said.

Markit had bought the 50 per cent of MarkitServ it did not own from DTCC for $175m in cash in 2013. The unit employs about 500 people and generated about $150m in revenue last year.

Mr Uggla said he expected the deals to close by the end of November.

Martin Brand, a senior managing director at Blackstone, said its investment in Ipreo meant the company “has been able to deliver rapid innovation and revenue growth, leading to substantial shareholder value creation”.

Barclays was lead financial adviser to IHS Markit, and HSBC acted as financial adviser. Goldman Sachs and Morgan Stanley acted as joint financial advisers to Ipreo.