In order to strengthen its data and valuation capabilities globally, Intercontinental Exchange Group ICE has completed the acquisition of Interactive Data Corporation. The deal was announced in Oct 2015 and the company mentioned the receipt of regulatory approvals last week.
Subsequent to closing of the acquisition, Interactive Data, which was a part of Silver Lake and Warburg Pincus has now become a wholly owned subsidiary of ICE. Since Interactive Data is a leading provider of financial market data, analytics and related trading solutions, its acquisition will allow ICE to provide data and valuation services to customers on a large scale.
Financials
The transaction was valued at $5.2 billion comprising $3.65 billion cash and 6.47 million ICE common shares, valued at $1.55 billion as of Oct 23, 2015, based on the 10-day trailing volume-weighted average price of ICE shares. However, based on the 10-day trailing volume-weighted average as of Dec 10, 2015, the stock consideration of the deal is valued at $1.67 billion.
To fund the cash portion of the transaction, ICE issued senior notes worth $2.5 billion in Nov 2015, comprising $1.25 billion notes due 2020 and another $1.25 billion notes due 2025. While the first set of notes carry an interest rate of 2.75%, the second set bears a 3.75% interest rate.
Our Take
The note issuance requires ICE to shed an aggregate of $81.25 million in the form of interest expenses, annually. Nevertheless, the company’s strong financial position (evident from its strong balance sheet and cash flow statement at the end of the last reported quarter) should allow it to service debt uninterruptedly. Although debt levels and interest expenses are expected to weigh upon the company, the acquisition of Interactive Data is likely to have a much long-standing positive effect.
Over the past few years there has been a rise in the demand for data and financial analysis globally. This has called for companies to upgrade themselves technologically with the appropriate tools and expertise. The aforementioned acquisition captures ICE’s target of capitalizing on the market opportunities in this regard. The deal is expected to equip ICE with the right apparatus to meet the increasing demand and thereby fortifies the company’s potential to achieve significant growth.
Zacks Rank and Other Stocks
ICE currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the financial services space include Fiserv, Inc. FISV, Global Payments Inc. GPN and Heartland Payment Systems, Inc. HPY. All three stocks hold a Zacks Rank #2 (Buy).
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