In a continued effort to complete its $44 billion merger with S&P Global, IHS Markit is divesting its base chemical business to News Corporation’s Dow Jones for $295 million.
According to the December 27 deal, pricing data unit Base Chemicals will become part of Dow Jones’ Professional Information Business along with Oil Price Information Service (OPIS) business (an energy and renewable data and information business), which will be bought from S&P Global and IHS Markit for $1.15 billion per an August announcement. Dow Jones noted that this new transaction will further improve its information services business.
As stated in the filing, Base Chemicals is “known for its pricing data, insights, analysis and forecasting capabilities for the world’s most important base chemicals delivered through its leading Market Advisory and World Analysis services. Base Chemicals has a strong track record of growth, with a revenue base that is nearly 100% digital and recurring, and, similar to OPIS, has high margins with modest Capex requirements.”
As a result, once Base Chemicals becomes part of Dow Jones it is expected to benefit from Dow Jones’ “expertise in news, research and events,” while Dow Jones will benefit from Base Chemicals’ “rich analysis and forecasting capabilities” to allow Dow Jones to “enhance its data, price and news solutions.”
“We are delighted with the opportunistic acquisition of Base Chemicals, which complements our purchase of OPIS, and will certainly strengthen the highly profitable and decidedly digital Professional Information Business at Dow Jones,” Robert Thomson, Chief Executive of News Corp. said in a press release. “From setting price benchmarks for chemicals, to tracking renewables and monitoring resource trends that impact most companies, we expect the incomparable intelligence of Base Chemicals, combined with the news and analysis of Dow Jones, will be formidable and lucrative.”
The filing notes that this divestiture was reached to satisfy the request of the UK Competition and Markets Authority as part of S&P Global and IHS Markit’s plan to merge. The divestiture transaction is subject to customary closing conditions and regulatory approval as well as the consummation of the S&P Global and IHS Markit merger.
As part of the transaction, News Corporation is expected to receive “a step up in tax basis in an annual deduction over the next 15 years with an estimated tax benefit of approximately $46 million on a present value basis.” The filing stated that in the fiscal year ending November 30, Base Chemicals was expected to generate around $65 million in revenue. Meanwhile, in Q1 for Fiscal Year 2022 Dow Jones noted a 15% increase in revenue in comparison to the same time last year and Dow Jones’ Professional Information Business had a 13% increase in revenue this quarter.
News Corporation is represented by Gibson, Dunn & Crutcher LLP.
Pursuant to S&P Global and IHS Markit’s November 2020 agreement, the companies will merge in an all-stock transaction valuing IHS Markit at $44 billion, including $4.8 billion in net debt. IHS Markit is represented by Davis Polk & Wardwell LLP and its financial advisors are Morgan Stanley & Co. LLC, Barclays, Jeffries LLC, and J.P. Morgan Securities LLC. S&P Global is represented by Wachtell, Lipton, Rosen & Katz and its financial advisors are Goldman Sachs & Co. LLC, Citi, and Credit Suisse.
The Base Chemicals divestiture follows S&P Global’s divestiture of its CUSIP Global Services to FactSet as a requirement for regulatory approval.
“The two [divestitures] we have announced today represent an important milestone in our progress toward satisfying the required regulatory conditions to complete our merger with IHS Markit,” Douglas L. Peterson, President and Chief Executive Officer of S&P Global said in a press release. “With these agreements in place, we are well positioned to dedicate our full attention to our goals of accelerating progress, enabling innovation and serving our customers through the combination of these two world-class businesses.”