The transaction is expected to be immediately accretive to McGraw-Hill’s earnings and S&P/Dow Jones Indices is expected to drive profit growth by:
- Increasing revenue through international and asset-class expansion, new product development, enhanced market data offerings and increased cross-selling opportunities
- Achieving cost savings and accelerating time to market by leveraging technology, data procurement, other back office functions and McGraw-Hill Markets’ infrastructure
- Reducing capital requirements and generating free cash flow for parent companies.
Alexander Matturri, executive managing director of S&P Indices, will be chief executive officer of S&P/Dow Jones Indices and Lou Eccleston, president of McGraw-Hill Financial, will chair the company’s seven-member Board that will include five directors designated by McGraw-Hill and two by CME Group.
Matturri said, “Those who rely on indices worldwide – from product issuers to exchanges to investors – will benefit from a deeper lineup of indices as well as a business model focused on innovation, performance and impact. Combining S&P Indices’ institutional strength with CME Group’s global exchange partnerships and Dow Jones Indexes’ retail focus will optimize our ability to respond to the changing global environment with increased speed and efficiency. Just as important, the structure of the joint venture is flexible enough to allow us to maintain our existing exchange relationships and work with other potential partners that could bring additional capabilities to the new company.”
All current indices will retain their brand names (S&P or Dow Jones). The S&P 500 and the Dow Jones Industrial Average® will continue to be separately maintained and licensed as the basis for a wide variety of funds and financial instruments. This transaction does not affect existing licensing agreements with other exchanges, nor does it preclude entering into future agreements with additional providers.
Other provisions of the agreement include:
- McGraw-Hill will acquire London-based Credit Market Analysis Ltd. (CMA), a leading source of independent data in the over-the-counter markets, from CME Group. This acquisition significantly expands McGraw-Hill’s asset-class coverage for data and pricing and adds the technology to move into intraday quotes on derivative and other OTC securities.
- A separate license agreement between Platts, a unit of McGraw-Hill, and CME Group/NYMEX will be extended.
McGraw-Hill was advised by BofA Merrill Lynch, Goldman Sachs and Deutsche Bank. Barclays Capital acted as exclusive financial advisor to CME Group.