Stockholm (NordSIP) – On April 21st, Morningstar announced it would become the sole owner of Sustainalytics, a global provider of ESG ratings and research. The company acquired a 40% stake in Sustainalytics in 2017 and will now purchase the remaining 60% of the shares.
Morningstar estimates the enterprise value of Sustainalytics to be €170 million. The purchase transaction will take place in three parts, with €55 million being paid in 2020, to be followed by additional cash payments in 2021 and 2022 based on a multiple of Sustainalytics’ 2020 and 2021 fiscal year revenues.
“Modern investors in public and private markets are demanding ESG data, research, ratings, and solutions in order to make informed, meaningful investing decisions. From climate change to supply-chain practices, the nature of the investment process is evolving and shining a spotlight on demand for stakeholder capitalism. Whether assessing the durability of a company’s economic moat or the stability of its credit rating, this is the future of long-term investing,” said Morningstar Chief Executive Officer Kunal Kapoor. “By coming together, Morningstar and Sustainalytics will fast track our ability to put independent, sustainable investing analytics at every level – from a single security through to a portfolio view – in the hands of all investors. Morningstar helped democratize investing, and we will do even more to extend Sustainalytics’ mission of contributing to a more just and sustainable global economy.”
Sustainalytics, a Dutch-domiciled company that provides ESG Risk Ratings as well as Engagement services it acquired from GES at the start of 2019, offers data on 40,000 companies worldwide and ratings on 20,000 companies in 172 countries. According to Morningstar, Sustainalytics’ more than 650 employees across 16 locations will be retained by the new owner.
Morningstar plans to continue to invest in Sustainalytics’ existing business while integrating ESG data and insights across Morningstar’s existing research and solutions for all segments. Dutch-domiciled Sustainalytics has a global business that includes more than 650 employees worldwide spanning 16 locations, which are planned to join the Morningstar family under the existing Sustainalytics leadership team.
“Sustainalytics welcomes the opportunity to join the Morningstar family. Our collaboration over the past several years has helped to extend the understanding and use of ESG insights and strategies to a multitude of investors, advisors, asset owners and managers across the globe,” said Sustainalytics Chief Executive Officer Michael Jantzi. “This new ownership structure will amplify our ability to bring meaningful ESG insights, products, and services to the global investment community and to companies around the world. Importantly, I am thrilled that my colleagues and I are joining a firm with a belief in our mission and intent to help us further expand our reach.”
According to Morningstar, it will fund the purchase with both cash and debt. The transaction is expected to have minimal dilution to net income per share post-closing, excluding any impacts of purchase accounting and deal-related expenses, as the company expects to incur costs to integrate certain capabilities and fund growth opportunities.