U.S. Stock Market

S&P Global in Advanced Talks to Acquire London-based IHS Markit for $44 Billion

S&P Global Inc, a leading provider of independent ratings, benchmarks, analytics and data to markets worldwide, is in advanced talks to acquire IHS Markit, a financial information services company, for nearly $44 billion, according to the Wall Street Journal.

This deal for IHS would be the largest of the year globally, according to Dealogic data, topping both chipmaker Nvidia Corp’s about $40 billion deal to buy chip designer Arm Holdings and nearly $40 billion deal between Nippon Telegraph & Telephone Corp. and a subsidiary, reported by the WSJ.

S&P Global’s shares closed 1.0 4% higher at $341.57 on Friday; the stock is up about 25% so far this year.

S&P Global Stock Price Forecast

Nine equity analysts forecast the average price in 12 months at $397.25 with a high forecast of $422.00 and a low forecast of $353.00. The average price target represents a 16.30% increase from the last price of $341.57. From those nine analysts, seven rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $411 with a high of $629 under a bull-case scenario and $242 under the worst-case scenario. The firm currently has an “Overweight” rating on the ratings company’s stock.

Several other analysts have also upgraded their stock outlook. UBS raised the price target to $424 from $422. BMO lowered their stock price forecast to $375 from $392. Credit Suisse increased their target price to $405 from $400. Stifel upped the target price to $353 from $351 and Oppenheimer raised the price objective to $399 from $396.

Analyst Comments

“S&P Global’s collection of businesses include a top two ratings agency, a leading index franchise, a market data platform, and a leading commodity pricing provider. It has a wide moat, strong market share, and high margins,” said Toni Kaplan, equity analyst at Morgan Stanley.

“We expect SPGI’s pricing power, the potential for product innovation, global expansion, commercial transformation, and cross-enterprise opportunities will drive an 11% EPS CAGR through 2024 with potential upside from China, Kensho, and ESG,” Kaplan added.

Upside and Downside Risks

Risks to Upside: Better-than-expected debt issuance due to rapid economic recovery. Counter-cyclicality of non-transaction revenue and ERS business could offset weaker issuance. Higher-than-expected synergies from BvD acquisition – highlighted by Morgan Stanley.

Risks to Downside: Greater-than-expected issuance decline due to credit-led recession. Additional industry regulation. Increased share loss to smaller rating agencies in both structured and corporate.