Markit chief executive Lance Uggla speaks before the company's market debut at the Nasdaq stock market in New York, on June 19, 2014.Adrees Latif/Reuters
He built it from scratch in a barn in 2003, and now, almost out of the blue, Lance Uggla is selling his baby for US$39-billion.
On Monday, S&P Global Inc., the American financial data conglomerate that offers everything from credit ratings to market indexes, announced it is buying London-based IHS Markit Ltd. IHS Markit in an all-stock transaction. After including $4.8-billion of net debt, the deal is the largest announced this year, and if it is approved by shareholders Mr. Uggla will relinquish operational control of IHS Markit and leave the stage.
Technically, he is sticking around as an adviser for a year on a contract that will pay him US$11.2-million, on top of a US$40-million “retention bonus.” But, by his own account, Mr. Uggla, 58, will largely be free – and even his dad has asked him why he wants to be.
“When your friends and family see you doing something, they define you by it,” Mr. Uggla said in an interview from New York, where he has spent the past six weeks negotiating the deal – some of which were spent in quarantine after travelling from London. His father viewed the sale as “ending something,” Mr. Uggla added. “I’m able to look at it as the next chapter for what I created.”
Born in Burnaby, B.C., and a graduate of Simon Fraser University, Mr. Uggla started out on Bay Street and rose to become global head of markets for CIBC World Markets and later co-head of credit trading at TD Securities in London. At the time, pricing data for exotic fixed-income products was extremely spotty, so he started building a database for credit default swaps that became the seeds of Markit, using $17-million in startup capital from TD. He launched the company from a barn in a small city north of London called St. Albans.
In its early days, Markit specialized in trading data and the company saw enormous growth as derivatives became popular securities. The key to its success has been its subscription model, and ever the banker, Mr. Uggla compares this to his time on trading desks. Canada’s investment banks have an Oct. 31 fiscal year end, he said, which means that on “Nov. 1 [budgets] basically reset back to zero, and then you have to reinvent yourself. ... With information services, there is a recurring nature to the revenues.”
By 2014, Mr. Uggla had decided to list Markit on Nasdaq, and the company’s initial public offering attracted the Canada Pension Plan Investment Board as a major shareholder. Both parties have prospered since.
For Mr. Uggla, who was already wealthy, the IPO and the resulting 290-per-cent surge in Markit’s stock price has made him almost unfathomably rich. Markit made options and other stock awards a significant part of executive pay over the years, and this year alone Mr. Uggla netted US$170-million from cashing in old stock options.
Canada Pension Plan Investment Board has also made a large return off its investment. The pension fund bought a six-per-cent stake worth US$250-million in 2014, then added to its position over time to keep a five per cent ownership after Markit merged with IHS Inc. in 2016. The pension fund’s shares, now worth roughly US$2-billion, will be swapped for S&P Global stock.
Mr. Uggla said he wasn’t looking to sell his company, but S&P Global chief executive Doug Petersen reached out this fall and together they talked about the future. Financial data have become extremely valuable, propelling deals such as Thomson Reuters’s sale of a majority stake in its financial data arm to Blackstone in 2018. A year later, London Stock Exchange Group bought the business, known as Refinitiv, for US$27-billion.
For many years, Mr. Uggla said, financial hardware was as important as data. Bloomberg LP, for instance, had proprietary terminals that largely organized publicly available information. But today, all anyone needs is an internet connection and from there they can buy access to whatever data they want.
In this world, the more data a company acquires, the more it can cross-sell to existing clients. “Scale is very valuable,” he added.
However, cost savings are also crucial, and the two companies have estimated hundreds of millions of dollars of expense synergies, many of which stem from saving on IT infrastructure.
Because the deal needs shareholder approval, Mr. Uggla is still in salesman mode, touting such possibilities. But when he stops to think about the enormity of it all, he confessed, there are a lot of feelings swirling around. “It’s hard,” he said, “because you have an emotional attachment to the company.”
With files from David Milstead
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.