S&P Global/IHS Markit: DOJ Staff Leans Toward Recommending Clearance With Divestiture

Published on Sep 13, 2021

DOJ staff is leaning toward recommending that department leadership clear S&P Global’s (SPGI) $44 billion bid for IHS Markit (INFO) now that the financial data service companies have lined up News Corp. (NWSA) as the divestiture buyer for IHS Markit’s energy pricing service, sources familiar with the matter said.

Announced August 2, the proposed $1.15 billion sale of the Oil Price Information Service (OPIS) to News Corp. would eliminate staff’s antitrust concern with the deal—a glaring overlap with S&P Global’s market-leading Platts service, the sources said. Department staff view News Corp. as a viable buyer, the sources said.

DOJ hasn’t uncovered any other serious antitrust problems with the deal aside from the energy price reporting overlap, and agency staff is wrapping up its review, sources said, as European regulators kick off their own investigations of the transaction. The sources declined to say when DOJ would make its final determination on the deal, but the department sometimes delays announcing its decisions to avoid interfering with foreign regulators’ reviews of the same merger.

The European Commission set an October 8 phase I review deadline after S&P Global and IHS Markit formally notified the Brussels-based competition watchdog of the merger last week. The UK’s Competition and Markets Authority (CMA) on August 23 initiated its own phase I investigation of the deal, setting an October 19 deadline for a decision.

Although the two European regulators are expected to conduct thorough reviews, the companies are sticking to their guidance that the deal, which they inked on November 29, will close in the fourth quarter.

A DOJ spokesperson declined to comment. An S&P spokesperson declined to comment, citing the ongoing regulatory reviews. Spokespeople for IHS Markit and News Corp didn’t respond to requests for comment.

PRAs. As a price reporting agency (PRA), OPIS is a distant fourth to Platts, which accounts for roughly 60 of the top 100 energy-related price benchmarks. But for some commodity segments, Platts and OPIS are the two biggest suppliers of pricing data. The competing services overlap on road fuels—gasoline, diesel and biofuels like ethanol and biodiesel—as well as carbon and renewables such as low carbon fuel credits and Renewable Identification Number credits.

DOJ staff attorneys and economists have asked industry players about Platts’ and OPIS’s significance in reporting spot and rack prices for refined products, as well as natural gases and liquids, a source said.

PRAs publish pricing data that provides a benchmark used by brokers, traders and producers to facilitate contracts and physical trades of a commodity.

Industry participants usually coalesce around a single PRA’s price report for a given commodity to reduce friction with the transaction and guard against arbitrage risk. Over time, this tendency limits competition on specific benchmarks as network effects kick in.

After initially considering divestitures of individual benchmarks, DOJ staff concluded that the deal’s competitive harm could only be addressed by selling all of OPIS and related coal, mining and minerals analytics businesses, sources said.

News Corp. was among as many as 20 prospective bidders for the assets. The company, which publishes The Wall Street Journal and New York Post, is attempting to raise margins amid lower revenue growth in its newspapers. On the day the divestiture was unveiled, News Corp. said in a statement that it was attracted to OPIS’s growing, high-profit businesses.

DOJ’s investigation has also included areas beyond PRAs, such as the companies’ competing energy forecasting and advisory services, and S&P’s eWindow, a data repository and online communications tool that helps enable commodity trades and aggregates transaction data that can be fed into Platts’ benchmarks.

But staff hasn’t found that these issues, or any other parts of the deal, raise significant antitrust concerns, the sources said.