Business Context and Reporting Period
This Form 8-K, dated March 1, 2010, reports that MSCI Inc. entered into a definitive agreement to acquire RiskMetrics Group, Inc. The transaction was announced on March 1, 2010, following the execution of the Merger Agreement on February 28, 2010.
Key Financial Metrics and Transaction Terms
- Consideration: RiskMetrics shareholders will receive 0.1802 shares of MSCI Class A common stock and $16.35 in cash per share.
- Financing: MSCI secured a commitment for $1,375 million in senior secured credit facilities from Morgan Stanley Senior Funding, Inc., consisting of a $1,275 million six-year term loan and a $100 million five-year revolving credit facility.
- Termination Fees: RiskMetrics must pay $50 million if it accepts a superior proposal or if its board changes its recommendation. MSCI must pay $100 million if the deal fails to close by September 1, 2010 due to financing failure or if MSCI terminates between March 29 and April 2, 2010.
- Expense Reimbursement: RiskMetrics may be required to reimburse MSCI up to $10 million if the merger agreement is not adopted by stockholders.
Material Changes and Agreements
The filing details the entry into four material definitive agreements:
- Merger Agreement: Establishes the terms for MSCI to acquire RiskMetrics via a merger with a wholly-owned subsidiary.
- Commitment Letter: Secures the debt financing necessary to fund the transaction and replace existing credit facilities.
- Voting Agreement: Key stockholders (including CEO Ethan Berman and affiliates of General Atlantic, Spectrum Equity, and TCV) holding approximately 54.4% of RiskMetrics shares have agreed to vote in favor of the merger.
- Non-Competition Agreement: Ethan Berman agreed to non-compete and non-solicitation restrictions until December 31, 2011.
Guidance, Risks, and Contingencies
The consummation of the merger is subject to several conditions, including RiskMetrics stockholder approval, regulatory approvals (Hart-Scott-Rodino and foreign antitrust), and the receipt of debt financing. The filing notes that the Merger Agreement contains customary representations and warranties but explicitly states these are not intended to provide factual information about the companies' current state for security holders. Risks include the potential for the deal to terminate if financing terms cannot be finalized by late March 2010 or if a superior proposal emerges.
Investor Verification Checklist
- Verify the final approval of the Merger Agreement by RiskMetrics stockholders.
- Confirm the receipt of all necessary regulatory and antitrust approvals.
- Monitor the finalization of definitive documentation for the $1,375 million credit facilities.
- Assess the impact of the $100 million potential termination fee on MSCI's liquidity if the deal fails due to financing.
- Review the effectiveness of the registration statement for the MSCI Class A common stock to be issued.