Deutsche Börse buys 80% of proxy firm ISS for $1.8bn

German stock exchange operator Deutsche Börse AG said it agreed to acquire an 80% stake in corporate governance firm Institutional Shareholder Services (ISS) for about $1.8 billion.

ISS is best known for advising investors how to cast proxy votes at shareholder meetings.

Deutsche Börse said it will acquire the majority stake in ISS “in partnership with current management and Genstar Capital” based on an ISS valuation of $2.275 billion for 100%.

Genstar Capital and current management will continue to hold a stake of approximately 20%. 

The deal marks the fourth ownership change for ISS in about 10 years.

Current owner Genstar Capital bought the firm for $720 million in 2017 from Vestar Capital Partners.

Vestar had bought ISS for $364 million in 2014 from MSCI.

The transaction is expected to close in the first half of 2021 subject to customary closing conditions and regulatory approvals.

“This partnership of a global market infrastructure provider with a leading corporate governance, ESG, data and analytics provider forms an excellent foundation to fully realise opportunities for future growth in ESG-based investing globally,” said Deutsche Börse.

“With this transaction, Deutsche Börse strongly commits to one of the key megatrends in the industry that will fundamentally change the investment space over the coming years.

“ISS’ unique ESG and data expertise will allow Deutsche Börse to emerge as a leading global ESG data player.

“ISS’ more than 4,000 clients include many of the world’s leading institutional investors who rely on ISS’ objective and impartial governance and ESG data and research, as well as public companies focused on ESG and governance risk mitigation as a shareholder value enhancing measure.

“This transaction will bring a strengthened capital structure to ISS and the ability to further accelerate organic and inorganic growth initiatives for the benefit of ISS’ clients while leveraging the infrastructure of Deutsche Börse and, in particular, its global index franchise.

“After the closing, ISS will continue to operate with the same editorial independence in its data and research organisation that is in place today.

“The current executive leadership team with CEO Gary Retelny will co-invest in the transaction and will also lead the business of ISS after the closing.”

ISS CEO Gary Retelny said: “Deutsche Börse’s market-leading brands and solutions align very well with ISS’ offerings within our governance, ESG, index and market intelligence businesses.

“We believe that the potential combination of ISS’ ESG data and STOXX’ indices will offer clients new, powerful and innovative solutions with unique data sets that meet their evolving investment needs.”

Genstar Capital managing director Tony Salewski said: “Gary and the ISS management team have built a market-leading data and governance platform through innovative product development and impactful acquisitions, and we appreciate the partnership we have had with them over the past three years.

“As we continue as investors in ISS, we are excited by the value that Deutsche Börse will bring and our shared commitment to further accelerate ISS’ growth.”
 

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Mark McSherry
Dalriada Media LLC sites are edited by veteran news journalist Mark McSherry, a former staff editor and reporter with Reuters, Bloomberg and major newspapers including the South China Morning Post, London's Sunday Times and The Scotsman. McSherry's journalism has also appeared in The Washington Post, The Guardian, The Independent, The New York Times, London's Evening Standard and Forbes. McSherry is also a professor of journalism and communication arts in universities and colleges in New York City. Scottish-born McSherry has an MBA from the University of Edinburgh and a Certificate in Global Affairs from New York University.