Investment analysis and index firm MSCI has agreed a deal to acquire the rival RiskMetrics Group in a cash and stock deal worth $1.55 billion.
RiskMetrics, which provides risk analysis, financial research and corporate-governance services for investors, began as an internal function within JP Morgan in 1994 before being spun out as a separate company in 1998.
Speculation that it had put itself up for sale surfaced earlier this year, with MSCI touted as a possible bidder, along with Bloomberg, McGraw-Hill and Thomson Reuters.
MSCI was also understood to have been interested in bidding for Interactive Data and the Dow Jones index business before it was snapped up by CME Group last month.
It has now signed a definitive merger agreement with RiskMetrics that will create a merged entity boasting around $750 million of revenues and 2000 employees across 20 countries.
The cash and stock transaction is valued at $21.75 per share based on the MSCI's closing price of $29.98 per share on Friday. The offer consists of $16.35 in cash and 0.1802 shares of MSCI per share of RiskMetrics, a 16% premium on the Friday closing price.
MSCI says the deal will be financed by existing cash and proceeds of debt and the firm has received a commitment letter from Morgan Stanley Senior Funding for senior secured credit facilities worth $1.375 billion.
Henry Fernandez, chairman and CEO, MSCI, says: "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."
Ethan Berman, CEO, RiskMetrics, adds: "Managing risk is critically important in today's financial markets. Our clients will greatly benefit from the combined company's expanded product range and enhanced risk management offerings."
The deal is expected to close in third quarter, subject to customary closing conditions, including approval by the shareholders of RiskMetrics, the receipt by MSCI of the proceeds of the debt financing for the transaction and antitrust clearance.