The Canada Pension Plan Investment Board is taking a lower-than-expected $250-million (U.S.) stake in the initial public offering of British financial data company Markit Inc.
Markit, headed by Canadian finance executive Lance Uggla, revealed in a regulatory filing in early June that CPPIB had “indicated an interest” in investing up to $450-million in its IPO, but said it was possible the pension fund could take less or buy none of the offering.
Given the huge demand for the stock, many investors got much less stock than they asked for. CPPIB spokeswoman May Chong said the fund was only given the minimum it had asked for, but said CPPIB is “quite happy” with the $250-million allotment.
It is believed to have received the largest allocation of any single new investor.
CPPIB said Thursday it will have a 6-per-cent ownership interest in Markit once its purchase is completed.
Markit, which provides financial data to companies working in the capital markets, announced earlier in June it would price its offering at between $23 and $25 a share, which valued the IPO at a maximum of $1.3-billion including a possible overallotment of additional shares depending on demand.
The firm ended up pricing the IPO at $24 a share and raising $1.3-billion by expanding the size of the offering. The company’s shares began trading Thursday on the Nasdaq exchange.
CPPIB is attracted to the company because of the fast growth for the service it provides, which has regulatory tailwinds at its back as regulators demand better pricing disclosure on the assets that Markit tracks.
The CPPIB division that made the investment, relationship investments, tends to hold stocks for years and looks to help companies as they grow. To that end, CPPIB has the right to nominate a director to Markit’s board and will do so at some time in the future.
“We’re very excited to be positioned to support Markit in its continued growth and we think the momentum it’s got and the currency it will have will help position it for the future,” said Scott Lawrence, head of relationship investments at CPPIB. “It’s notable that we’re making this investment from relationship investments, and we intend to be with them for a long time.”
CPPIB’s relationship investments team is responsible for making significant minority investments in public companies – typically between $100-million and $1-billion – and says its mandate is to help companies “achieve transformative growth opportunities, improve balance sheets or effect significant shareholder transitions.”
Mr. Lawrence said the Markit investment fits well with his group’s mandate to help create greater value through an ongoing partnership.
Markit was founded in 2003 by a group of financial executives, including Mr. Uggla, who is chairman and CEO and was previously global head of credit trading at TD Securities Inc.
The company originally provided daily data on the credit derivatives market, but has expanded into a wide range of financial data sold to banks, insurers, hedge funds, asset managers, regulators and exchanges.
Markit is currently owned by its senior executives and a group of financial institutions and private equity investors. Its largest shareholders are Singapore state investment firm Temasek, which has a 10.4-per-cent stake, and private equity group General Atlantic Partners Tango LLP, which has an 11.4-per-cent stake.
Many major brokerage firms, including Bank of America and Citigroup, reduced or sold their stakes in Markit in the IPO offering. All shares sold in the IPO came from sales from existing investors, so Markit did not raise funds from the offering.
The company’s total value was set at $4.3-billion based on the IPO offering price.
Markit shares climbed quickly when trading began midmorning on Thursday, immediately climbing $2.90 to $26.90.