TMX Group Limited recently announced it has agreed to acquire the remaining approximately 78% of the common units of VettaFi Holdings LLC, a leading US-based indexing, digital distribution, analytics, and thought leadership company, for US$848 million. This brings the total amount to be paid for full ownership to $1.03 billion – which includes the strategic investments TMX Group made in VettaFi in the first half of 2023 for approximately 22% of the common units.
VettaFi offers a comprehensive suite of global indices through its index factory, robust ETF services, including ETF trends and analytics, a global ETF database, and digital distribution. Along with providing interactive online tools and research, VettaFi offers asset managers an array of indexing and digital distribution solutions to innovate and scale their businesses. McKenzie and Jay Rajarathinam, Chief Operating Officer, TMX Group, currently sit on the VettaFi Board of Directors.
— 80%+ recurring revenues over the LTM through September 30, 2023
— Implied total valuation net of expected tax benefit of 15.4x 2024E adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA). The company expects a tax benefit with a net present value of approximately $170 million, primarily representing amortizable acquired goodwill and intangibles
— The deal is expected to be accretive to adjusted earnings per share in year one, excluding any synergies
— Transaction is expected to be financed with committed bank debt up to $1 billion in term loans with $600 million, up to $200 million, and $200 million maturing 12, 18, and 24 months from closing, respectively; with a leverage ratio of approximately 3.5x after closing and repayment of VettaFi debt, with plans to return to target leverage range two years post-close
— TMX to assume $100 million of VettaFi debt, which they plan to retire with funds made available to TMX under new term loan
— VettaFi will be included in TMX’s Global Solutions, Insights & Analytics segment
Completion of this transaction is expected in January 2024, subject to customary closing conditions.
Evercore worked as an exclusive financial advisor to TMX Group, and WilmerHale LLP acted as legal counsel to TMX Group. National Bank of Canada, the Toronto-Dominion Bank, and the Bank of Montreal are providing the new committed credit facilities to TMX Group. Barclays served as VettaFi’s exclusive financial advisor, and Ropes & Gray LLP acted as VettaFi’s legal counsel.
KEY QUOTES:
“The acquisition of VettaFi will add a dynamic new component to our growing information business, with an exciting set of capabilities and a visionary, innovative team committed to client success. The experience of working together this year has confirmed that TMX and VettaFi are a powerful combination and a tremendous culture fit. Moving forward, the addition of VettaFi increases the depth and value of data-driven insights we provide to clients, expands our digital expertise and enriches our industry-leading support for ETF issuers. From a strategic standpoint, this acquisition accelerates TMX’s long-term global expansion, and increases the proportion of revenue derived from our Global Solutions, Insights and Analytics division, and from recurring sources.”
– John McKenzie, Chief Executive Officer, TMX Group
“Early on in our relationship with TMX Group it became clear that not only did we have complementary products and solutions, but our companies also have complementary cultures rooted in like-minded values and ambitious vision. Both companies place a premium on putting the client first and moving opportunity into action. I am excited for VettaFi’s clients, partners and employees as we begin this next chapter. Together, we will make markets and each other better.”
– Leland Clemons, Chief Executive Officer, VettaFi
“Today marks an exciting chapter in VettaFi’s transformation and is a testament to the leadership team’s client focus and commitment to relentless innovation. We have enjoyed working side-by-side with the team to recruit top financial services and technology talent to better serve the asset management community and its broader ecosystem.”
– Andrew Feller, Managing Partner of Aretex Capital Partners
