S&P stock price tumbles after spending $44 billion to acquire IHS Markit

Written by: Michael Harris
December 4, 2020
  • S&P Global agreed a deal to acquire IHS Markit for $44 billion in shares
  • S&P Global and IHS Markit generated $11.1 billion together in revenue last year
  • Yesterday’s move lower pushed S&P Global stock price further lower to trade 4.38% in the red this week

Shares of S&P Global (NYSE: SPGI) are trading more than 4% in the red this week after the financial data giant agreed a deal to acquire IHS Markit (NYSE: INFO) for $44 billion in shares.

Fundamental analysis: The biggest deal of 2020

S&P Global stroke a deal that will merge the two of the largest financial information and analytics companies in the world to create the third biggest player in this sector. According to the two companies, the deal is expected to be completed in the second half of 2021 and it is the largest one in 2020. 

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Two companies hope to save about $480 million in synergies. S&P Global has been looking for an acquisition that will reduce its dependence on its core rating business. S&P Global and IHS Markit generated $11.1 billion together in revenue last year. 

“We’ll have 76% of our revenue after this will be recurring revenue, and the rating agency will shrink from about 45% to 30%,” Chief Executive Doug Peterson told CNBC. 

“It’s a repossession of the company in the highest growth areas of the financial markets.”

Lance Uggla, the founder and helm of IHS MarketLance, said that she believes that the deal will receive a green light from antitrust regulators. Media reports that emerged after the deal was reached said that the incoming Biden administration will scrutinize the deal.

“There is almost zero overlap. When we look across the whole $11.5 billion of revenue, I would say it’s negligible,” Uggla said. 

“Just in a couple of our benchmarks and products that we have in energy, but it’s a very, very small amount. So, little to no overlap is how we would describe it.”

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Technical analysis: Shares plunge

S&P Global stock price closed 2% lower on Thursday at $326.61. Yesterday’s move lower pushed the price action further lower to trade 4.38% in the red on a weekly basis. The stock has now almost completely erased gains (+9%) from November. 

S&P Global stock weekly chart (TradingView)

The price action is now heading towards 6-month lows below October’s low of $319.04. The next support line lower is located at $313, which is the stock’s high from February. 

Summary

S&P Global’s deal to acquire IHS Markit for $44 billion is the largest deal in 2020. Shares of the company fell over 4% in the aftermath of the deal.