Markit Ltd. (MRKT), a global provider of financial information services, with principal offices in London, U.K., plans to raise $1.1 billion in its upcoming IPO.
The firm will offer 45.7 million shares-all of which are insider shares-at an expected price range of $23-$25 per share. If the IPO can find the midpoint of that range at $24 per share, MRKT will command a market value of $5.0 billion.
It should be noted that the Canada Pension Plan Investment Board reportedly plans to purchase shares valued at up to $450 million in the IPO.
Very Strong Underwriting
MRKT filed on May 5, 2014.
Lead Underwriters: Barclays Capital Inc; BofA Merrill Lynch; Citigroup Global Markets Inc; Credit Suisse Securities LLC
Underwriters: BNP Paribas Securities Corp.; Deutsche Bank Securities Inc; Goldman, Sachs & Co; HSBC Securities Inc.; J.P. Morgan Securities LLC; Jefferies LLC; Morgan Stanley & Co. LLC; RBC Capital Markets, LLC; RBS Securities Inc; TD Securities LLC; UBS Investment Bank
Overview of MRKT
MRKT is global provider of financial information services including pricing and reference data, trading and valuation services, indices, trade processing, and enterprise software.
MRKT provides these services to over 3,000 institutional services such as banks, regulators, hedge funds, and corporations. The firm's users include portfolio managers, traders, researchers, risk managers, and other capital market professionals, as well as compliance, operations, and data managers.
MRKT organizes its business into three divisions. The Information division offers products and services for valuations, trading, research, and risk and liquidity assessments, allowing customers to analyze markets, price instruments, and comply with regulatory requirements. The Processing division provides trade processing solutions for OTC derivatives, foreign exchange and syndicated loans, enabling rapid confirmation of transactions. Finally, the Solutions division offers enterprise software platforms, hosted custom web solutions, and managed services.
MRKT's business is oriented around American and European users, with some 49.9% of revenue generated through American customers and 40.3% of revenue generated through European customers for calendar 2013.
MRKT offers the following figures in its F-1 balance sheet for the three months ended March 31, 2014:
Net Income: $39,800,000.00
Total Assets: $3,271,200,000.00
Total Liabilities: $1,158,900,000.00
Stockholders' Equity: $2,112,300,000.00
MRKT has made impressive gains in revenue over the past several years, posting revenues of $762.5 million, $860.6 million, and $947.9 million for the years ended December 31, 2011, 2012 and 2013, respectively. Over the same periods, the firm posted profits attributable to equity holders of $125.8 million, $125.0 million, and $139.4 million, respectively.
MRKT faces varying competitors across its divisions, many of which are established firms with existing, entrenched relationships with MRKT's potential customers.
Competitors for the Information division include FactSet (NYSE:FDS), Bloomberg L.P., Thomson Reuters Inc (NYSE:TRI), and Interactive Data Corporation. Competitors for the Processing division include IntercontinentalExchange (NYSE:ICE), Traiana Inc., and Bloomberg. Competitors for the Solutions division include GoldenSource, IBM (NYSE:IBM), Deloitte, and Intralinks Holdings, Inc (NYSE:IL).
Founder Lance Uggla serves as MRKT's Chairman and CEO, and has been a director and chief executive of the business since its 2003 formation.
He previously served as Global Head of Credit Trading and Head of Europe and Asia for TD Securities.
Mr. Uggla received a BBA from the Simon Fraser University and an MSc from the London School of Economics.
We are optimistic on this IPO.
MRKT is a giant in financial services, and its strong brand recognition-especially among financial professionals and investors-as well as the interest of the Canada Pension Plan Investment Board should drive its IPO to success.
The firm has posted consistent profits through a period of strong revenue expansion, and its primarily fee-based, recurring revenues make for steady, predictable revenues.
MRKT benefits from established relationships with many of its customers, many of which have integrated its solutions into their businesses, making it difficult for its customers to pursue other options.
Though this is a 100% insider IPO bailout that will do absolutely nothing to boost the company's fortunes, we believe that MRKT is a buy that aggressive investors should consider in moderation.
Disclosure: The author has no positions in any stocks mentioned, but may initiate a long position in MRKT over the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.