MSCI sees $50m in RiskMetrics’ deal synergies and staff cuts

MSCI chief identifies potential in ESG indices.

MSCI says it has identified $50m of cost synergies in its proposed acquisition of RiskMetrics and plans to cut an unspecified number of jobs at the combined firm. Speaking on a conference call for investors following yesterday’s announcement of a $1.55bn takeover of RiskMetrics, MSCI chairman and chief executive Henry Fernandez, said he also saw an “opportunity” to move some positions within a combined group to emerging market locations. Fernandez said one potential growth area for the combined firm could include ESG indices and that MSCI was on the lookout for further acquisitions amongst equity index providers, although he said there were no identifiable targets at present. Fernandez said RiskMetrics’ corporate governance arm, Institutional Shareholder Services, had been “non-core” to the MSCI-RiskMetrics deal, but that he saw significant revenue generation from the business. Fernandez told shareholders: “The intention is to recognise that it isnon-core to what we do today and to benefit from the cash flows.” He said ISS, which includes the recently acquired KLD and Innovest research groups, was reaping the benefits from a significant investment in its new voting platform. ISS had $144.7m of revenues in 2009, boosted by the new acquisitions.RiskMetrics’ chief executive Ethan Berman is to stay on with the combined company for an unspecified time as an advisor. MSCI is acquiring RiskMetrics in a transaction that values the latter 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.