MSCI agreed to acquire RiskMetrics Group in a cash-and-stock transaction valued at $1.55 billion, according to a joint statement by the companies.
The deal should net index provider MSCI $50 million in cost savings by next year, including $30 million in overlapping positions across a range of functions from Risk Metrics, a leading provider of corporate governance and risk management advisory services, said Henry A. Fernandez, MSCI chairman, CEO and president, in an interview. The other $20 million in savings is expected from overlapping market data, office location and administrative expenses.
M. Ethan Berman, RiskMetrics chairman and CEO, will become an advisory director of the combined company, a non-management role, said Mr. Fernandez. Mr. Berman will advise on integration of the two companies and is expected to leave when that work is completed.
Mr. Fernandez will remain as MSCI chairman, CEO and president.
Decisions on inviting other RiskMetrics senior management haven’t been made, but Mr. Fernandez said professional staff reduction from the consolidation is expected to be small. Elimination of positions is expected to come from administrative support staff.
The companies will be consolidated under the MSCI name; MSCI will adapt some RiskMetrics’s labels as brands but not separate units, Mr. Fernandez said.
MSCI plans to combine both its own Barra and RiskMetrics’ risk management services under the RiskMetrics brand name, Mr. Fernandez said.
MSCI plans to operate RiskMetrics’ corporate governance research and proxy-voting advisory services under the ISS, or Institutional Shareholders Services, brand name that RiskMetrics used. MSCI also plans to combine RiskMetrics’ environmental, social and governance data and analytics with MSCI’s equity research business.
In addition, MSCI plans to create index and other products tied to RiskMetrics’ corporate governance and ESG research, Mr. Fernandez said.
The companies expect the deal to close in the third quarter pending shareholder and regulatory approval, the statement said.
MSCI is offering RiskMetrics shareholders $21.75 a share, comprising $16.35 in cash and 0.1802 shares of MSCI stock per RiskMetrics share. The deal amounts to 75% cash and 25% stock for RiskMetrics shareholders.