IHS Markit Ltd. - 10-Q filing on 2016-10-07

Business Combinations

9 Months Ended

Aug. 31, 2016

Business Combination Disclosure [Text Block]

Business Combinations

During the three and nine months ended August 31, 2016, we completed the following acquisitions:

CARPROOF. On December 24, 2015, we acquired CARPROOF, a Canada-based company that offers products and services in vehicle history, appraisal, and valuation for the automotive industry, for approximately $459.2 million, net of cash acquired. We acquired CARPROOF in order to expand our vehicle history report services into Canada. This acquisition is included in our Transportation segment.

Oil Price Information Service (OPIS). On February 10, 2016, we acquired OPIS, an internationally referenced pricing reporting agency that serves the oil, natural gas, and biofuels industries, for $652.3 million, net of cash acquired. OPIS information primarily serves the downstream energy market, and we completed this acquisition in support of our efforts to further diversify our energy portfolio. This acquisition is included in our Resources segment.

We have preliminarily allocated $368.6 million of the aggregate purchase price for these two acquisitions to amortizing intangible assets and $793.2 million to goodwill.

Merger with Markit Ltd.

As described in Note 1 above, we completed the Merger on July 12, 2016 in an all-share transaction. The following table shows the calculation of the purchase consideration (in millions, except for Markit closing price):



Markit shares issued and outstanding at merger date ⁽¹⁾	179.79
Markit closing price	$	32.70
Total equity consideration	$	5,879.1
Additional consideration for stock compensation	368.3
Total purchase consideration	6,247.4
Less cash acquired	(97.1		)
Purchase price, net of cash acquired	$	6,150.3

⁽¹⁾ Excludes restricted stock awards that were issued and outstanding as of the merger date, but were not yet vested.

Markit is a leading global provider of financial information services. Its offerings are designed to enhance transparency, reduce risk, and improve operational efficiency in the financial markets. We have created a new Financial Services segment for Markit, and we have included revenue and expense attributable to Markit in the Financial Services segment from the date of the Merger. Markit contributed $156.9 million of revenue and a loss of $35.0 million from continuing operations for the post-Merger period ended August 31, 2016, primarily due to merger-related costs.

The following unaudited pro forma information has been prepared as if the Merger had been consummated at December 1, 2014. This information is presented for informational purposes only, and is not necessarily indicative of the operating results that would have occurred if the Merger had been consummated as of that date. This information should not be used as a predictive measure of our future financial position, results of operations, or liquidity.



	Three months ended August 31,				Nine months ended August 31,
Supplemental pro forma financial information (unaudited)	2016		2015		2016		2015
	(In millions)
Total revenue	$	861.9	$	835.2	$	2,577.1	$	2,450.5
Net income	$	71.5	$	45.7	$	176.5	$	173.0

The pro forma net income excludes $60.4 million and $67.1 million of one-time merger and transaction costs for the three and nine months ended August 31, 2016, respectively.

The purchase price allocation for this business combination is preliminary and may change upon completion of the determination of fair value. The following table summarizes the initial purchase price allocation, net of acquired cash, for the Merger (in millions):



Assets:
Current assets	$	322.0
Property and equipment	61.2
Intangible assets	3,323.2
Goodwill	4,369.9
Other long-term assets	14.5
Total assets	8,090.8

Liabilities:
Current liabilities	258.3
Deferred revenue	230.8
Deferred taxes	820.3
Long-term debt	535.7
Other long-term liabilities	17.9
Noncontrolling interest	77.5
Total liabilities and noncontrolling interest	1,940.5

Purchase price, net of cash acquired	$	6,150.3