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IPE special report May 2018

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MSCI to buy risk software firm Barra for E675m

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GLOBAL - Morgan Stanley is to buy risk management analytics firm Barra for 816.4 million dollars (675.3 million euros) in cash and integrate it with its majority-owned MSCI index business.

MSCI and Barra said in a joint statement that they have signed a “definitive merger agreement” under which Morgan Stanley will acquire Barra for 41 dollars a share.

Barra's operations would be combined with MSCI when the deal closes, in around 60 to 120 days - subject to approval from regulators and Barra shareholders. The deal has been approved by both firms’ boards.

"The combination of the two firms will create a global maket leader that can deliver innovative solutions to a wide range of investment issues faced by our clients," said Barra chief executive Kamal Duggirala.

"The combination of MSCI's deep understanding of indices across asset classes and Barra's industry-leading risk management analytics will provide a powerful platform for enhancing our clients' investment processes within and across asset classes,” said MSCI president and chief executive Henry Fernandez.

California-based Barra was formed in 1975 and had 141 million dollars in revenue in 2003. It has more than 500 employees and 8,500 users.

Paul Grimes, chief operating officer at MSCI’s rival FTSE Group said the Barra deal was evidence of greater “collaboration and consolidation” in the index industry. He cited recent deals between S&P and Citigroup and FTSE’s own accord on standards with Dow Jones.

He said FTSE did not seek to buy Barra. “We continuously look at what we can offer the market.”

In January Barra reported third-quarter income from continuing operations of 8.7 million dollars, compared to 8.6 million dollars a year earlier. It said at the time that it saw “aggressive cost management and consolidation” at its clients.

New York-based MSCI provides equity, fixed income and hedge fund indices to almost 2,000 organisations worldwide. Morgan Stanley is the majority shareholder, with investment management group the Capital Group Cos. as the minority shareholder.

Elsewhere, Morgan Stanley reported that the assets of exchange traded funds worldwide rose 2.6% in March to 229.3 billion dollars. It added that the highest percentage gains in Europe.

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