Factset Research (NYSE: FDS) has inked a deal to acquire CUSIP Global Services (CGS) from S&P Global (NYSE: SPGI) in an all-cash transaction worth $1.925 billion.
FactSet Research is a U.S.-based financial data and software company, which provides integrated financial information, analytical applications and software services.
Shares of the company gained 1.3% to close at $485.62 on December 27 following the news.
Synergies from the Deal
CGS has been an operator of market standard security identifiers for more than 50 years. It is also the exclusive provider of Committee on Uniform Security Identification Procedures (CUSIP) and CUSIP International Numbering System (CINS) identifiers globally.
It manages a database of 60 different data elements and identifies more than 50 million global financial instruments. Furthermore, its security master files are relied upon by critical front, middle and back-office functions.
CGS generates $175 million in revenues annually and has consistently grown its revenue in the mid-to-high single-digit range, with strong margins.
The addition of CGS will significantly boost FactSet’s capabilities and its role in the global capital markets. The acquisition will also advance its open data strategy.
The deal is expected to be immediately accretive to adjusted earnings and margins in the first year, excluding certain associated costs.
CGS will operate as a part of the FactSet Content and Technology Solutions (CTS) segment. Notably, the addition of CGS will boost CTS’s Annual Subscription Value (ASV) to more than $425 million.
Other Details
FactSet is expected to receive an incremental tax benefit of $200 million from the acquisition. FDS intends to finance the deal by utilizing available cash as well as committed financing.
The acquisition is expected to close during the first quarter of 2022, subject to certain regulatory approvals.
CEO Comments
FactSet CEO, Phil Snow, commented, “CGS is a unique asset with tremendous market recognition providing deep alliances across the financial industry. Its core competency in securities identification aligns well with FactSet’s industry leading data management capabilities. We believe this acquisition will greatly benefit FactSet’s clients, employees and shareholders.”
Douglas L. Peterson, President and CEO of S&P Global, stated, “CGS has delivered outstanding service, reliability, and innovation to the global securities market for more than 50 years, and I am highly confident that FactSet will continue to build on this heritage.”
Analysts Recommendation
On December 23, UBS analyst Alex Kramm increased the price target on FactSet Research to $478 (1.6% downside potential) from $471 and reiterated a Hold rating.
Overall, the stock has a Hold consensus rating based on 2 Buys, 5 Holds and 3 Sells. The Factset Research price target of $440.44, implies 9.30% downside potential from current levels.
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