S&P Global Inc. (SPGI - Free Report) yesterday announced that it has reached a deal to acquire RateWatch business from New York-based financial news and information company, TheStreet, Inc.
The deal, subject to working capital and certain other customary adjustments involves purchase of all the assets of the RateWatch business for $33.5 million in cash. TheStreet expects to receive nearly $32 million of proceeds (assuming full payout of customary escrows and net of taxes and transaction-related expenses and fees).
The buyout is unlikely to have any material impact on S&P Global’s 2018 adjusted earnings per share (EPS), which is expected to be in the range of $8.45-$8.60. The return on invested capital (ROIC) is likely to surpass S&P Global’s required rate of return after three years.
Mike Chinn, president of S&P Global Market Intelligence and executive vice president, Data and Technology Innovation for S&P Global, stated, "RateWatch's robust datasets complement and strengthen our core capabilities of providing differentiated data and analytics solutions for the banking sector."
A glimpse at S&P Global’s price trend reveals that the stock has had an impressive run on the bourse on a year-to-date basis. Shares have returned 22.5%, significantly outperforming the industry’s rally of 15.3% year to date.
Boosts Market Intelligence Segment
RateWatch will be integrated into S&P Global’s newly formed reportable business segment - S&P Global Market Intelligence ("Market Intelligence"). This is expected to boost S&P Global Market Intelligence's community bank analytics and data offerings. With a contribution of almost 28% to total revenues, the segment is currently the second biggest contributor to the company’s total revenues.
Revenues from this segment were $437 million in the first quarter of 2018, up 9% year over year. The improvement came on the back of growth across Desktop (7% growth), Data Management Solutions (13%), and Risk Services (8%). Adjusted operating profit increased 4% to $129 million. Adjusted operating profit margin declined 150 basis points to 30% due to heavy investments in commercial and technology.
The company expects Market Intelligence margins to improve in the second quarter of 2018 as well as in the full year. Additionally, the segment is likely to positively impact the company’s overall margin for 2018.
Zacks Rank & Stocks to Consider
Currently, S&P Global is a Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Business Services sector include The Dun & Bradstreet Corporation (DNB - Free Report) , TransUnion (TRU - Free Report) and FLEETCOR Technologies, Inc. (FLT - Free Report) . All the stocks carry a Zacks Rank #2 (Buy).
The long-term expected earnings per share (three to five years) growth rate for Dun & Bradstreet, TransUnion and FLEETCOR Technologies is 4.5%, 10% and 16.5%, respectively.
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