U.S.-based IHS Inc IHS.N agreed to buy Markit Ltd MRKT.O to create a $13 billion London-based data and business research provider, in the latest example of a U.S. company moving its domicile overseas where corporate tax rates are lower.
The companies said IHS shareholders will own about 57 percent of the combined company following the close of the all-stock deal, which values Markit at about $5.9 billion.
Englewood, Colorado-based IHS, whose businesses include Jane's Defence Weekly and technology industry research firm iSuppli, will pay the equivalent of $31.13 per Markit share, a premium of 5.6 percent to Markit's Friday close.
Markit's shares were up 10.9 percent at $32.70 at midday. The shares have risen about 23 percent since the company went public in June 2014. IHS's shares, which hit a 3-year low of $92.90 last month, were up 5.6 percent at $116.90.
Markit, founded in 2003 by ex-TD Securities credit trader Lance Uggla in a barn north of London, provides pricing and reference data, index and valuation services.
IHS Chief Executive Jerre Stead will become chairman and chief executive of the combined company, IHS Markit.
Uggla will be president for now and take over the top job after Stead’s retirement on Dec. 31 next year.
IHS shareholders will get 3.5566 shares of the combined company for each share held.
The combined company, while maintaining some "key" operations in Colorado, will be based in London.
So-called tax inversion deals have become the subject of a fierce political debate in the United States as well as a source of concern for the government over the potential loss of tax revenue.
"We don't see this transaction as being implicated by the U.S. anti-inversion rules," IHS Chief Financial Officer Todd Hyatt said on a conference call with analysts.
IHS said the combined company was expected to have a tax rate in the low- to mid-20 percent range. IHS's tax rate for the year ended Nov. 30 was 20.5 percent, while Markit paid taxes at the rate of 31.5 percent for the year ended Dec. 31.
The deal is the latest in a string by IHS, whose energy information business, its biggest, has been hit by the slide in oil prices. Revenue in the division fell almost 1 percent to $215.9 million in the first quarter ended Feb. 29.
IHS said in January it would buy U.S.-based Oil Price Information Service (OPIS) to add real-time pricing information to its energy analytics business.
The company agreed in December to buy Canada-based vehicle data provider Carproof Corp for $460 million to boost its automotive research business.
Markit competes with Thomson Reuters Corp (TRI.TO) and Bloomberg LP in providing financial data to investors.
IHS also reported on Monday a stronger-than-expected 6.7 percent rise revenue to $548.4 million, helped mainly by a jump in non-subscription income, which includes organizing industry events.
M. Klein and Co and Goldman, Sachs & Co were IHS's financial advisers, while Markit was advised by J.P. Morgan Securities. IHS's legal adviser was Weil, Gotshal & Manges LLP, while Davis Polk & Wardwell LLP provided legal advice to Markit.
(Reporting by Abhirup Roy and Supantha Mukherjee in Bengaluru; Editing by Anupama Dwivedi and Ted Kerr)