Information services provider IHS (NYSE:IHS) agreed to buy used-car shopping tool Carfax and automotive data giant R.L. Polk on Monday for $1.4 billion in cash and stock.
IHS expects the acquisition to be “significantly accretive” to 2014 earnings per share, providing it with an “attractive financial profile and accretive growth trajectory,” according to IHS chief financial officer, Todd Hyatt.
"Polk has an adjusted EBITDA margin in the mid-20 percent range and we see a clear path to drive the business to an accretive margin level within the next six to eight quarters," Hyatt said. "This is an asset that creates high levels of free cash flow and the combination creates an impressive free cash flow engine at IHS going forward."
Polk last year had annual revenues of $400 million, growing at a mid- to high-single digit range. Together with IHS Automotive, the two will offer complementary information and analytics solutions that establishes IHS as an important piece in the global automotive value chain.
IHS will pay for 10% of the deal using equity and will fund the rest with cash on hand, cash from an existing revolver and a new bank term loan. The purchase remains subject to customary closing conditions.
Shares of IHS climbed about 3% in early trade to $110.04.