Deutsche Borsa consoles itself with the ISS proxy after the Borsa Italiana setback

Deutsche Borsa consoles itself with the ISS proxy after the Borsa Italiana setback

Deutsche Börse will acquire 80% of ISS for 1.82 billion dollars. Here are the major proxy advisors in the world and who they are controlled by.

Deutsche Börse will acquire 80% of Institutional Shareholder Services (Iss) for $ 1.82 billion, while Genstar Capital and current management will continue to hold a 20% stake. Iss is the largest proxy advisor in the world, alongside Glass, Lewis & Co. The latter belongs 80% to the Ontario Teachers' Pension Plan Board and 20% to Alberta Investment Management Corporation.

DEUTSCHE BÖRSE ACQUIRES ISS

Deutsche Börse, after unsuccessfully attempting to take over Borsa Italiana from the London Stock Exchange, scores a big blow as it will acquire approximately 80% of Institutional Shareholder Services for approximately 1.82 billion dollars (1.54 million dollars). EUR). In fact, 100% of the American proxy advisor was valued at 2.275 billion dollars, or 1.925 million euros. The transaction should be completed in the first part of 2021, after the approval of the competent authorities.

WHO IS ISS

Iss, highlights Milano Finanza , is the largest player in the field of corporate governance consultancy in the world according to Harvard Law School, alongside Glass, Lewis & Co. The Iss group is known to the global financial community for having advised in the last twenty years investors on how to vote by proxy at shareholders' meetings in order to build long-term value, but also on sensitive corporate issues ranging from mergers to who to sit on a board of directors. Iss, founded in 1985, currently has more than 2,000 employees worldwide and serves more than 4,000 clients, including many of the world's leading institutional investors.

SHAREHOLDERS OF ISS

Deutsche Börse, once the deal is concluded, will have an approximately 80% stake in ISS, while Genstar Capital and the current management will continue to hold an approximately 20% stake. The American Genstar Capital is a leading private equity firm that has been actively investing in high standing groups for over 30 years and currently holds approximately $ 19 billion in assets under management. Genstar Capital acquired ISS from Vestar Capital Partners in 2017 for $ 720 million. Vestar in turn bought Institutional Shareholder Services from MSCI (Morgan Stanley Capital International) in 2014 for $ 364 million. MSCI has held ISS since 2010. For the proxy advisor, this is therefore the fourth change of ownership in the last decade.

ESTIMATES ON THE ISS BUSINESS

Iss, as stated in the Deutsche Börse press release, presents interesting growth rates. The proxy advisor in 2020 is expected to generate net revenues of over 280 million dollars and an adjusted Ebitda margin of approximately 35% before the effects of the transaction with the German group. Institutional Shareholder Services turnover is expected to grow organically at an average annual rate of more than 5% through 2023.

TURNOVER SYNERGIES FOR DEUTSCHE BÖRSE

Deutsche Börse as a whole expects that the turnover synergies linked to the transaction with ISS will translate into additional Ebitda 15 million euros by 2023.

THE NEW 2023 COMPASS PLAN BY DEUTSCHE BÖRSE, MORE WEIGHT AT THE M&A

Deutsche Börse during the virtual Investor Day on November 18, 2020 presented the new medium-term strategy Compass 2023 . The company that manages the Frankfurt Stock Exchange expects to increase the contribution of net revenues related to M&A. In detail, the group estimates revenue growth of approximately 10% on average per year until 2023: 5% should derive from M&A activities, including the acquisition of ISS. Deutsche Börse also expects Ebitda and EPS (earnings per share) growth of around 10% on average per year until 2023, while the Ebitda margin should remain stable at the current levels considered high.

Theodor Weimer, the managing director of Deutsche Börse, specified that “in terms of growth from M&A, however, we will always focus on high profitability, which is in our DNA”. The inorganic growth will cover 6 areas: index & analytics, ESG, commodities, FX, fixed-income and investment fund services.

WHO IS THE SECOND MAJOR PROXY ADVISOR

Glass, Lewis & Co alongside Iss plays a leading role in the field of corporate governance consulting. Glass, Lewis & Co is owned 80% by Ontario Teachers' Pension Plan Board (OTPP) and 20% by Alberta Investment Management Corporation (AIMCo). The pension fund, one of the largest and most aggressive in the world, bought Glass, Lewis & Co in October 2007 from China's Xinhua Finance for $ 46 million. OTPP in August 2013 then sold 20% of the proxy advisor to AIMco.


This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/deutsche-borse-si-consola-col-proxy-dopo-lo-smacco-borsa-italiana/ on Sun, 22 Nov 2020 07:10:07 +0000.