Markit Group Ltd., the British financial data company that is nipping at the heels of Bloomberg and Thomson Reuters, is headed towards a stock market flotation that might turn its Canadian founder and CEO, Lance Uggla, into one of Britain’s richest men.
According to various reports, none denied by Markit, the company has confidentially filed for an initial public offering in New York and could pull the IPO trigger in the summer. The firm’s value last year was estimated at $5-billion (U.S.), a figure based on the 10 per cent stake bought by Temasek, Singapore’s sovereign wealth fund, for about $500-million.
Mr. Uggla owns 15 per cent of Markit, putting his stake’s value at $750-million. But Markit has been growing at low double-digit rates, suggesting he may earn even more from the IPO, depending on the timing of the listing. In the 2012 financial year, the latest published results, Markit had a net profit of $195-million on revenues of $860-million.
In an interview with The Globe and Mail in London in late 2007, less than a year before the financial crisis, Mr. Uggla, who is from Vancouver and is now 51, boldly predicted that Markit would become a $10-billion company. “It’s our target valuation, where we think we can be,” he said.
There is no doubt Markit has been a phenomenal growth story. Bankers who know the firm routinely refer to it as “another Bloomberg or Thomson Reuters in the making,” referring to the big-name financial data, news and software companies that dominate the industry. (The Globe and Mail is owned by Toronto’s Woodbridge, which controls Thomson Reuters).
When it was launched in 2001 with $17-million in startup capital from TD Securities, Markit had about 10 employees, all of them parked in a Herfortshire barn just north of London. Today, it has more than 3,000 employees in 11 countries, making it a global operator. Offices in Calgary and Vancouver were added in 2011. There are about 750 employees in its London headquarters.
Markit found its niche by pricing products that were either not priced by banks or reluctantly priced by them, because regulators insisted on it. Its launch products were data on valuations of privately traded credit derivatives. Since then, it has expanded into dozens of new product lines, providing everything from asset-backed securities pricing and structured finance cash flow models to dividend forecasting and derivative buyside evaluations.
Mr. Uggla is a graduate of Simon Fraser University and the London School of Economics, went to TD Securities in late 1995 from CIBC World Markets, where he had been global head of fixed income, foreign exchange and debt origination. In London, he ran TD’s fast-growing global credit trading operations and began to build a database on credit pricing (TD was one of the first players in the credit derivatives market). At the time, accurate credit prices, unlike the prices for shares, foreign exchange and government bonds, were hard to get.
Using data collected from counterparties, TD built up a wealth of information on the prices of credit and credit derivatives such as credit-default swaps (known as CDSs), corporate bonds, syndicated loans, convertible bonds and the like.
As the database expanded and gained a reputation in the credit universe as a reliable source of transparent pricing, Mr. Uggla decided to build an independent business around the data, create a company called Markit and float it on the stock market. The dot-com implosion killed that idea. So Mr. Uggla launched Plan B – spinning off TD’s database and the technology that supported it into a private company.
TD agreed to come in as 50-50 partner but only if Mr. Uggla recruited other banks as investors. As owners, the banks would have the incentive to supply the credit-pricing information that Markit needed for its databases. At the same time, the banks would, as owners, have no incentive to create a competitor to Markit.
Markit’s shareholders include private equity firm General Atlantic, with 11 per cent. Deutsche Bank and about a dozen investment banks own 51 per cent. Mr. Uggla and Markit’s senior employees own much of the rest. If the IPO goes ahead, their investment returns are bound to be phenomenal.