S&P Gets Conditional Approval for $44bn IHS Markit Merger
S&P Global and IHS Markit announced that they have reached a proposed agreement with the Antitrust Division of the U.S. Department of Justice (DOJ) that permits the companies to proceed with their $44 billion combination.
Consistent with the commitments both companies have made to obtain regulatory approval in other jurisdictions, the proposed agreement with the DOJ requires the companies to divest IHS Markit’s Oil Price Information Services (OPIS), Coal, Metals and Mining (CMM), and PetroChem Wire (PCW) businesses. The companies previously announced an agreement to sell these businesses to News Corp. The proposed agreement with the DOJ, which remains subject to court approval, does not require the companies to make any additional divestitures.
Subject to the receipt of remaining regulatory approvals and satisfaction or waiver of specified closing conditions, S&P Global and IHS Markit continue to expect the merger to close in the first quarter of 2022.
Goldman Sachs & Co. LLC is serving as financial advisor to S&P Global, and Wachtell, Lipton, Rosen & Katz is serving as legal counsel. Davis Polk & Wardwell LLP is serving as legal counsel for IHS Markit.
Department of Justice
The Department of Justice announced that it will require S&P Global Inc. (S&P) to divest three of IHS Markit Ltd.’s (IHSM) price reporting agency (PRA) businesses to resolve antitrust concerns arising from their proposed $44 billion merger.
PRAs provide critical price discovery for numerous commodity markets, including markets where trades are done off-exchange in private transactions that are not subject to reporting obligations.
The divestitures of Oil Price Information Services (OPIS), Coals, Metals, and Mining (CMM), and PetrochemWire (PCW) will maintain competition in PRA services and protect customer access to essential pricing information.
In addition, the department will require OPIS to end a 20-year non-compete with GasBuddy, a popular crowd-sourced retail gas price information app that has long provided OPIS with pricing data for resale to commercial customers. This non-compete has effectively prevented GasBuddy — a company well positioned to enter the retail gas price data market — from launching a data service that would compete with OPIS.
The Justice Department’s Antitrust Division filed a civil antitrust lawsuit in the U.S. District Court for the District of Columbia to block the proposed merger and to prevent OPIS from enforcing its non-compete with GasBuddy. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the competitive harms alleged in the complaint.
“Without these significant divestitures, the proposed merger would have led to higher prices and lower quality for PRA customers throughout the United States,” said Acting Assistant Attorney General Richard A. Powers of the Justice Department’s Antitrust Division. “The divestitures will preserve competition for PRA services, which are vital to the proper functioning of commodity markets and promote transparency in the financial markets. The remedy also demonstrates the department’s commitment to curtail the anticompetitive use of non-compete agreements.”
According to the complaint, as originally proposed, the merger would eliminate significant head-to-head competition between S&P’s Platts division and IHSM’s OPIS, CMM, and PCW businesses in providing PRA services for refined petroleum products, coal and petrochemicals. In these markets, PRA price assessments are often used as a price term in supply agreements and as the basis for settling hedging instruments like futures contracts. In the United States, S&P and IHSM are two of the three largest competitors in PRA services for refined petroleum products and coal; similarly, S&P and IHSM are two of the four largest competitors in PRA services for petrochemicals.
The complaint also alleges that the 20-year non-compete contained in OPIS’s exclusive data license with GasBuddy has effectively prevented GasBuddy from launching a data service that would compete with OPIS. The waiver of this horizontal restraint will remove a barrier that has prevented healthy competition in the sale of retail gas price data.
Under the terms of the proposed settlement, S&P and IHSM must divest OPIS, CMM, and PCW to Dow Jones. Dow Jones is a provider of business and financial news and related data products and services. The proposed settlement also requires S&P and IHSM to waive the exclusivity and non-compete provisions contained in the data license agreement between OPIS and GasBuddy.
The department expresses thanks to its enforcement partners in the European Commission, the United Kingdom’s Competition and Markets Authority, and Canada’s Competition Bureau for their close and constructive collaboration on this matter, which enabled a thorough investigation and resulted in remedies that will preserve competition throughout North America and Europe.
S&P and IHSM are both financial and commodity information conglomerates, providing data, indices, pricing assessments, news and analytics to participants in various financial and commodity markets around the world. S&P is a New York corporation, headquartered in New York City, with reported global 2020 revenues of $7.4 billion. IHSM is a Bermuda corporation, headquartered in London, with reported global 2020 revenues of $4.3 billion.
As required by the Tunney Act, the proposed settlement, along with a competitive impact statement, will be published in the Federal Register. Any person may submit written comments concerning the proposed settlement during a 60-day comment period to Owen M. Kendler, Chief, Financial Services, Fintech, and Banking Section, Antitrust Division, U.S. Department of Justice, 450 Fifth Street NW, Suite 4000, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the U.S. District Court for the District of Columbia may enter the final judgment upon finding it is in the public interest.
The claims resolved by the settlement are allegations only and there has been no determination of liability.
Source: U.S. Department of Justice
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