NEW YORK (
( MHP), owner of the Standard & Poor's indexes is in talks with the
, owner of the Dow Jones Indexes, to create an index joint-venture.
The venture would combine the two leading stock market indexes and a multitude of other index products spanning commodity, bond, currency and derivative markets. The news of the deal, which hasn't been announced and may fall through after a year of less advanced discussion was first reported by the
Wall Street Journal
on Thursday afternoon.
CME Group and McGraw Hill would form a joint venture of index businesses, famous for their stock market aggregates. Under current negotiations, McGraw-Hill would take a 75% ownership in the index venture, the CME would hold roughly 25% and Dow Jones would also have a small stake because of its 10% ownership of Dow Jones indexes. No details on price or valuation of the joint-venture have been released.
The Dow Jones Industrial Average is a price-weighted average of 30 of the largest U.S. companies
excluding Apple created in 1867, while the S&P 500 is a value weighted index that began in 1957. While the Dow Jones and S&P 500 are quoted as the benchmarks for U.S. stock markets, both index businesses have many more products.
Index products are attractive because of investors growing use of derivative and exchange traded funds products. Combined, the venture would hold over 100 thousand different indexes that could be licensed as a reference point for insurance, ETF, structured product and derivative products. According to Standard & Poor's website, "Licensing Standard & Poor's indices allows an organization to track the performance of publicly-available securities or develop benchmarks for an actively-managed portfolio."
ETF and derivative products for institutional and individual investors are highly valued products because of their customizability, which allows investors to hold baskets of assets without having to purchase each individual security. In June 2009, ,
bought Barclays Global Investors, the money-management arm of the British bank ,
, for $13.5 billion to gain the $1 trillion in assets it had built up using a specialization in ETF and derivative products for investors.
The index joint venture, would further lead McGraw-Hill down a path of becoming a smaller and more specialized business.
In August, the Ontario Teachers' Pension Plan and hedge fund Jana Partners took a combined 5.2% stake in McGraw-Hill and called for it to break itself into smaller parts. After increasing their stake in the summer, the investors presented a four way split of the company to extract the maximum value for shareholders.
The company then announced in September that it would split into two public companies, McGraw-Hill Education, containing learning products and McGraw-Hill Markets, its financial business of Standard & Poor's ratings and index products, data provider S&P Capital IQ, commodities news service Platts and consumer reviews company J.D. Power and Associates.
In its September announcement of the split, McGraw-Hill said that the Markets operations would have 2011 revenue of $4 billion, with 40% coming from international sales. The company estimated that its ratings, index and commodities products would account for 90% of overall revenue in the split. The McGraw-Hill Education division would have $2.4 billion in revenue, the company estimated. To appease the shareholders, including activists pushing for a split, the company also said it would accelerate share repurchases to $1 billion.
( SLE) and
have all announced similar plans to de-conglomeratize.
On Monday, McGraw-Hill said its ratings business, founded in 1888, received a "Wells Notice" alleging violations of federal securities laws from the Securities and Exchange Commission for its ratings of a 2007 collateralized debt obligation called "Delphinus CDO-2007-1. The Standard & Poor's ratings division currently rates 162,418 new and 556,872 revised debt issues for a combined value of $32 trillion, according to its website.
Share's in McGraw-Hill rose 1.4% to $42.31 a share in after-hours trading after rumors of the joint-venture plan broke.
According a report by
, Kayak.com the search website is planning to delay its initial public offering until markets become less volatile.
In an interview, Kayak's chief marketing officer Robert Birge said to AllThingsD that the markets are too volatile for Kayak to currently proceed with the I.P.O. it filed 11 months ago.
In the filing, Kayak sought to raise $50 million in capital. The Norwalk, Conn.-based company reported in the filing that revenue was $128 million at this time last year and it earned $6.2 million of net income.
Kayak's online travel search market has come under pressure from larger player
, after it purchased ITA Software in 2010. Though the acquisition was opposed by
Bing, antitrust regulators gave the deal approval this August contingent on Google's continued licensing of ITA's products to other travel search competitors on "commercially reasonable terms."In a risks to our business section of its 2010 I.P.O. filing, Kayak wrote, "If ITA or Google limit our access to the ITA software or any improvements to the software, increase the price we pay for it or refuse to renew our contract and we are unable to replace ITA with a comparable technology, we may be unable to operate our business effectively and our financial performance may suffer."
Currently, other popular online companies Zynga and Groupon are still proceeding with I.P.O plans.
-- Written by Antoine Gara in New York
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