S&P, IHS Markit offer more divestment to overcome UK’s competition concerns; U.S. FTC has not issued a complaint

In the U.S., a spokesperson for antitrust with the Federal Trade Commission said by email on Oct. 22 that while the agency doesn’t comment on proposed mergers, confirm or comment on investigations, it will publish a news release if an investigation leads to a complaint. “The agency has not issued a complaint in this matter,” she said.

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In the UK, the Competition Market Authority has raised concerns about certain commodity assessments and will complete by Nov. 2, 2021 a Phase 1 evaluation of the merger announced in Nov. 2020.

S&P Global and IHS Markit have discussed with the UK’s Competition Market Authority “the divestiture of IHS Markit's base chemicals business (comprising the Market Advisory Service and World Analysis businesses) to address any remaining concerns,” S&P said on Oct. 19.

Base chemicals are the building blocks of the petrochemical industry: ethylene, propylene, butadiene, and the group of aromatics that includes benzene, toluene, and xylenes. The base chemicals are precursors to all other petrochemical products that result in final goods from coatings to carpets, and from disinfectants to synthetic rubbers, unbreakable glass, and polyester shirts.

The additional offer comes on top of previous divestment announcements through the sale of “IHS Markit's Oil Price Information Services (OPIS); Coal, Metals and Mining; and PetroChem Wire businesses.”

“As previously announced, the parties agreed to a sale of these businesses to News Corp, subject to approval of relevant antitrust authorities,” it added.

Oil Price Information System (OPIS) reports price assessments related to oil, gasoline, diesel, ethanol, crude, natural gas, petrochemicals and recycled plastics.

OPIS buyers, News Corp., said on Aug. 2 that the plan is to integrate the acquired business bought for $1.2 billion from S&P Global with services including Dow Jones Newswires. The group’s business media includes The Wall Street Journal.

The merger, as announced in Nov. 2020, had valued all of IHS Markit at $44 billion.

Targeting Phase 1 clearance

“S&P Global and IHS Markit will now formally submit these remedy proposals” to the Competition Market Authority in the UK, according to their Oct. 19 statement.

The companies “consider the proposed remedies sufficient” and hope to obtain clearance for their transaction in Phase 1.

S&P and IHS Markit had received in mid-October a deadline of five days to submit proposals to the UK competition authorities or else face the possibility of an escalation into a Phase 2 stage that would involve a more in-depth investigation.

UK oil, chemical assessments concerns

According to the UK’s Competition Market Authority, it “investigated a range of concerns across the broad range of complex financial markets in which the merging businesses are active.”

“This investigation ultimately uncovered only limited competition concerns, for the most part because the merging businesses’ activities were found to be complementary in nature or, where both are active, their combined presence was found to be relatively small,” it said.

The authority found nevertheless that the merger could lead to competition concerns in a limited number of markets in which the merging businesses’ combined presence is more significant like “the supply of price assessments of biofuels, coal, oil, and petrochemicals in the UK.”  

“Within each of these markets, the CMA found that S&P and IHS Markit have a significant combined presence, compete closely with one another and would face only limited competition after the merger,” said Colin Raftery, the CMA’s senior director.

Future plans for OPIS

“OPIS will be the cornerstone for a rising commodities, energy and renewables digital business,” said in August Robert Thomson, News Corp.’s chief executive.

International consulting company Burton Taylor in 2020 estimated the energy and commodity price assessment information industry annual revenue at $3 billion, with projections for 7% annual growth over five years, according to the News Corp.’s press release at the time.

Segments like connected cars and electric vehicles could allow OPIS some growth markets particularly outside the U.S., the company added at the time of the purchase.

Latest consolidation

S&P Global and IHS Markit announced on Nov. 30, 2021 a merger that will result in S&P Global owning nearly 68% of the new company, with the CEO of S&P Global Douglas Peterson taking control of the entire operation.

That announcement came four months after RELX-owned ICIS acquired Chemical Data (CDI) in July 2020.

S&P Global resulted after the 2015 purchase by then McGraw Hill Financial, owners of Platts and S&P ratings, of what used to be SNL Financial.

IHS and Markit merged in 2016, after acquisitions of other companies like OPIS were completed.

Other participants in the fuels and petrochemicals price assessments industry include Argus, which until 2016 was owned by the family of the founder until a majority stake was sold to equity firm General Atlantic.

General Atlantic two years ago sold an undetermined value of equity to HG, a London-based investment group that lists Argus on its website among its assets.

By Renzo Pipoli