Investment analysis and market index company MSCI Inc said it will buy RiskMetrics Group Inc in a cash-and-stock deal valued at about $1.55 billion, ending a two-month speculation about the risk advisory firm's future.
MSCI, known for its MSCI international stock indexes, said its offer consisted of $16.35 in cash and 0.1802 MSCI share for each RiskMetrics share.
The offer represents a 17 percent premium to RiskMetrics' closing price on Friday.
The transaction is expected to close in MSCI's third fiscal quarter of 2010, and would be financed by existing cash and proceeds of debt financing, MSCI said.
The combined scale, complementary product capabilities and clients and extensive geographic footprint of MSCI and RiskMetrics will drive significant cost-saving synergies and revenue opportunities, MSCI Chief Executive Henry Fernandez said in a statement.
The combined company would have about $750 million in revenue and estimates $50 million in cost synergies from duplicate areas such as platforms, services and offices.
RiskMetrics, which was spun off from JPMorgan Chase in 1998, is the market leader in risk management systems and supplies data, analytics, risk reporting, and other information services.
Demand for risk management products has risen since the start of the credit crisis as financial firms look to mitigate the risk arising on their investment portfolios and balance sheets.
However, as firms cut back on costs and look to consolidate, expenses for risk products have taken a hit.
New York-based MSCI, which was spun off from Morgan Stanley in 2007, said it received a commitment letter from Morgan Stanley Senior Funding Inc, for senior secured credit facilities amounting to up to $1.38 billion to fund the cash consideration in the acquisition.
Morgan Stanley advised MSCI in the deal, while Evercore Group LLC advised RiskMetrics.
RiskMetrics CEO Ethan Berman and certain other RiskMetrics shareholders have entered into a voting agreement with MSCI and agreed to vote about 54 percent of the outstanding RiskMetrics shares supporting the deal, the companies said.
Reuters reported in January that RiskMetrics had put itself up for sale and MSCI, Bloomberg, McGraw-Hill Cos Inc and Thomson Reuters Corp could be interested in buying the firm.
Shares of MSCI closed at $29.98, Friday on the New York Stock Exchange, while those of RiskMetrics closed at $18.63. (Reporting by Brenton Cordeiro and Anurag Kotoky in Bangalore; Editing by Aradhana Aravindan, Jarshad Kakkrakandy)