Morningstar buys Hemscott

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New York—Morningstar, the US based research firm best known for its mutual fund ratings, announced it will acquire Hemscott, a UK based provider of equity data sold to investors and the investor relations market.  The seller was Ipreo Holdings, which is majority owned by private equity firm Veronis Suhler.  The acquisition expands Morningstar’s equity offerings, as well as its footprint in the UK.

Veronis Suhler Stevenson, a private equity firm which frequently invests in financial information properties, took Hemscott private in August 2006.  At the time, Hemscott was primarily focused on investor relations, that is, selling into the corporate investor relations function to help them track shareholder interest in their stocks.  Veronis also acquired CoreData, a database of historical income/balance sheet information which was originally part of Media General.   Veronis integrated the CoreData database into Hemscott.  Veronis also bought bigdough, a database specializing in tracking institutional investors.

Veronis bought bigdough as part of its growing Hemscott ‘family’ of businesses.  It initially thought of bigdough as complementary to Hemscott’s investor relations focus, but decided that bigdough was more successful selling into the capital markets—the equity sales areas of investment banks pay more for information on investors than corporate IR professionals will spend.  Bigdough is not part of the Ipreo sale of Hemscott to Morningstar.

Morningstar is paying $51.6 million for Hemscott, which represents a 3.5x to 4x revenue multiple assuming Hemscott’s revenues (excluding bigdough) are around $13 or $14 million.  While this valuation is below the 4.4x valuation Veronis paid minority shareholders to delist Hemscott last August, the transaction excludes the fastest growing element of Hemscott—bigdough. 

Since Hemscott is primarily UK based, the acquisition increases Morningstar’s non-US businesses, complementing the acquisition of S&P’s fund information businesses earlier this year.  Morningstar also adds a 200 person databanking operation in New Delhi.

The press release follows.

Morningstar, Inc. to Acquire Hemscott Businesses from Ipreo Holdings LLC

<!–[if !vml]–>PR Newswire<!–[endif]–>Acquisition to strengthen Morningstar’s global equity database and international presence

December 17, 2007: 08:00 AM EST

CHICAGO, Dec. 17 /PRNewswire-FirstCall/ — Morningstar, Inc., , a leading provider of independent investment research, and Ipreo Holdings LLC, a leading global provider of capital markets and investor relations solutions, have entered into a definitive agreement for Morningstar to acquire the Hemscott data, media, and investor relations Web site businesses from Ipreo for $51.6 million in cash, subject to working capital adjustments. The companies expect to complete the transaction in early January, subject to customary closing conditions.

Under terms of the agreement, Morningstar will acquire the following businesses:

    — Hemscott Data, which provides financial information on virtually all

       publicly listed companies in the United States, Canada, the United

       Kingdom, and Ireland. Hemscott’s global database contains data on more

       than 19,500 public companies, 170,000 directors and officers, as well

       as earnings estimates from 68 securities firms in London. Hemscott Data

       has more than 350 clients including accounting and law firms,

       brokerages, investment banks, research firms, financial Web sites, and

       public companies. The business focuses on providing fundamental public

       company data; executive and director information, including detailed

       biographies and compensation; and historical pricing and volume data on

       stocks. Hemscott Data includes Hemscott Guru, a leading business-to-

       business online research tool that contains up-to-date financial data

       and directors’ biographies on more than 2,500 UK-quoted companies and

       400,000 private companies; and Hemscott Adviser Rankings Guide, a

       comprehensive listing of more than 1,800 leading providers of

       professional services to all UK- and Irish-registered companies listed

       on the London Stock Exchange.

    — Hemscott India, which operates a state-of-the-art data collection

       center in New Delhi, India.

    — Hemscott.com, a free investment research Web site in the United Kingdom

       that attracts more than 320,000 unique users per month, and Hemscott

       Premium and Premium Plus, subscription-based investment research and

       data services for executives and high net-worth investors. The Premium

       services have more than 2,000 subscribers.

    — Hemscott IR, a pioneer in online investor relations and corporate

       communications services in the United Kingdom. Hemscott IR designs,

       builds, hosts, and maintains investor relations pages and corporate Web

       sites for more than 540 companies.

“Hemscott is a well-known brand with a large and loyal client base. This acquisition fits with our strategies of building a premier global equity database and expanding our presence outside the United States,” said Joe Mansueto, chairman and chief executive officer of Morningstar. “Hemscott has a leading equity database covering more than 19,500 companies in the United States, the United Kingdom, Canada, and parts of continental Europe. Today Morningstar provides data covering approximately 13,000 equities in the United States, Canada, and Australia. We have some overlap, but this acquisition will significantly strengthen our equity coverage. In addition to its data on a greater number of stocks, Hemscott has decades more data history, as well as management and director information, for U.S., UK, and Canadian stocks. Another crucial component of this acquisition is Hemscott’s sizable data operation in India, where we’ve been interested in establishing a presence for some time.”

Mansueto added, “As part of this agreement, we’re also acquiring a leading investor Web site in the United Kingdom, which dovetails with our belief that there is a growing market for investment information outside the United States. And we’re acquiring a UK-based investor relations Web site business, which is a new market for us but one that directly leverages our data and analytics for IR professionals.”

Scott Ganeles, chief executive officer of Ipreo, said, “At the outset, we had two key strategic objectives. First was to find a buyer that would allow the Hemscott assets to reach their full potential, and becoming part of a premier data and research firm of Morningstar’s caliber will allow them to do just that. Second was to focus Ipreo’s attention on the areas of the market where we can create the greatest value: state-of-the-art software solutions and high-end analytical services for capital markets professionals and corporate officers.”

The Hemscott businesses that Morningstar is acquiring have approximately 200 employees in New Delhi, India, 70 employees in London, and 10 employees in the United States.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in the United States and in major international markets. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutional clients. The company has operations in 18 countries and minority ownership interests in companies in three additional countries.

Morningstar provides data on more than 260,000 investment offerings, including nearly 130,000 managed products such as mutual funds, exchange- traded funds (ETFs), insurance and pension funds, separate accounts, and hedge funds. The company has more than 180 analysts around the world and provides independent research and analysis on more than 2,000 mutual funds and ETFs as well as 2,000 stocks. Morningstar provides quantitative star ratings on more than 25,000 distinct mutual fund portfolios and ETFs globally.

About Ipreo

Ipreo is a leading global provider of high quality data, expert insight, and productivity solutions to investment banking and corporate clients. Formed in late 2006 through the merger of i-Deal, a New York-based provider of new- issuance software and analytics, and Hemscott, a London-based financial data firm and parent of Bigdough in the United States, Ipreo has more than 700 employees and operations in the United States, the United Kingdom, and Hong Kong. Ipreo is majority owned by private-equity firm Veronis Suhler Stevenson LLC. For more information, go to www.ipreo.com.

Marlin & Associates New York LLC acted as strategic and financial advisor to Ipreo.

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