MSCI buys RiskMetrics for $1.55bn

Deal proposed in cash and shares.

MSCI, the index and risk group is buying RiskMetrics, the New York-listed risk management and corporate governance firm, in the latest twist to consolidation in the ESG research and governance space. It is paying approximately $1.55 billion in a cash and stock transaction that values RiskMetrics at $21.75 per share. RiskMetrics last traded at $18.69 and its highest ever share price was $25.50 during 2008. MSCI’s offer, which is subject to approval by shareholders of RiskMetrics, consists of $16.35 in cash and 0.1802 shares of MSCI per share of RiskMetrics. The combined company would have approximately $750m of revenues and 2,000 employees across 20 countries. To support the buy-out, Ethan Berman, chief executive officer of RiskMetrics Group, and other RiskMetrics shareholders, said they had entered into an agreement with MSCI through which they will vote approximately 54% of RiskMetrics shares in favour of the transaction. Private equity firms, General Atlantic Partners, Technology Crossover Ventures and Spectrum Equity own 46% of RiskMetrics, while part of the remaining shares are listed in New York.
Morgan Stanley served as MSCI’s financial advisor, whileRiskMetrics was advised by Evercore Group. MSCI said it expected the deal to close in its third fiscal quarter of 2010 with the transaction financed by existing cash and proceeds of debt. MSCI has received a commitment letter from Morgan Stanley, the US bank, for debt facilities aggregating up to $1.375bn to fund the cash portion of the acquisition. Henry Fernandez, chairman and chief executive at MSCI, said: “This deal marks a significant milestone in our effort to become the leading provider of investment decision support tools. The combined scale, complementary product capabilities and clients and extensive geographic footprint of MSCI and RiskMetrics will drive significant cost-saving synergies and revenue opportunities.” In November 2009, RiskMetrics finalised the $10m buy-out of Boston-based KLD Research & Analytics, which also gave it a foothold in the SRI index business via deals with FTSE and Canada’s Jantzi Sustainalytics. That came after a February, 2009, $16m buy-out of Toronto-based Innovest. The company also owns ISS, the world’s biggest proxy voting agency, which covers around 40,000 corporate annual general meetings every year.