Second bidder wanted to spin off ISS
The sale of US risk management and corporate governance firm RiskMetrics earlier this year went right down to the wire, with MSCI eventually edging out a rival bidder who wanted to spin off RiskMetrics’ ISS proxy voting arm, new company documents reveal.
Index firm MSCI acquired RiskMetrics for $1.55bn, or $21.75 per share, in a cash and shares deal announced on March 1.
But there was a competing, all-cash offer worth around $20-21 per share on the table from a bidder known as ‘Company A’, which had lined up six potential buyers forISS. RiskMetrics has been obliged to disclose the information, contained in a regulatory filing, as part of the settlement of a class action suit relating to the merger. The company has revealed that it settled the class action on April 23. It was brought by an unnamed plaintiff that challenged the deal alleging the board had breached their fiduciary duties.
RiskMetrics denies any wrongdoing or liability in the case. The document recounts in detail how the merger progressed, with virtually every phone call and email logged. It shows that RiskMetrics and MSCI had been discussing the potential for a strategic combination since 2005, culminating in a rejected merger proposal in August 2009.
And it has emerged that the RiskMetrics board was still in merger talks with ‘Company A’ in late February, just days before the deal with MSCI was agreed. The directors eventually decided that the deal with Company A would take “more time and effort”, given that it and its potential partners had less time to do its due diligence.
At the time of the transaction, MSCI chief executive Henry Fernandez described ISS as a “non-core” part of a combined MSCI-RiskMetrics. RiskMetrics bought ISSfor $542.8m in 2007.