TMX Group to Acquire VettaFi

• TMX to acquire the remaining ~78% of the common units of VettaFi for US $848m.
• Deal accelerates long-term growth strategy as well as financial and transformational objectives
• Increases proportion of revenue from recurring and global sources
• Adds innovative new client service team and capabilities to GSIA, TMX’s fastest-growing segment

TMX has announced an agreement to acquire the remaining approximately 78% of the common units of VettaFi Holdings LLC (VettaFi). VettaFi is a leading indexing, digital distribution, analytics and thought leadership company based in the US. The deal is costing US $848m ($1.15bn*). Therefore, the total cost of full ownership is US$1.03bn ($1.40bn*). That amount includes the strategic investments that TMX Group made in VettaFi for approximately 22% of the common units in the first half of 2023.

John McKenzie, Chief Executive Officer of TMX Group, said:

The acquisition of VettaFi will add a dynamic new component to our growing information business, with an exciting set of capabilities and a visionary, innovative team committed to client success.

He continued:

The experience of working together this year has confirmed that TMX and VettaFi are a powerful combination and a tremendous culture fit. Moving forward, the addition of VettaFi increases the depth and value of data-driven insights we provide to clients, expands our digital expertise and enriches our industry-leading support for ETF issuers. From a strategic standpoint, this acquisition accelerates TMX’s long-term global expansion, and increases the proportion of revenue derived from our Global Solutions, Insights and Analytics division, and from recurring sources.

VettaFi provides a suite of global indices through its index factory, robust ETF services that include analytics and ETF trends, a global ETF database, and digital distribution. In addition to offering research and interactive online tools, VettaFi provides asset managers with various indexing and digital distribution solutions to scale and innovate their businesses. Mr McKenzie and Jay Rajarathinam, COO of TMX Group, currently sit on the VettaFi Board of Directors. For more information visit vettafi.com.

Leland Clemons, Chief Executive Officer, VettaFi, also noted:

Early on in our relationship with TMX Group it became clear that not only did we have complementary products and solutions, but our companies also have complementary cultures rooted in like-minded values and ambitious vision. Both companies place a premium on putting the client first and moving opportunity into action. I am excited for VettaFi’s clients, partners and employees as we begin this next chapter. Together, we will make markets and each other better.

Andrew Feller, Managing Partner of Aretex Capital Partners stated:

Today marks an exciting chapter in VettaFi’s transformation and is a testament to the leadership team’s client focus and commitment to relentless innovation. We have enjoyed working side-by-side with the team to recruit top financial services and technology talent to better serve the asset management community and its broader ecosystem.

Summary financial details:

• • 80%+ recurring revenues over the LTM through September 30, 2023**
  • Implied total valuation net of expected tax benefit of 15.4x 2024E adjusted earnings before interest, taxes, depreciation and amortization (adjusted EBITDA). We expect a tax benefit with a net present value of approximately US $170m($231 million*), primarily representing amortizable acquired goodwill and intangibles**
  • The transaction is expected to be accretive to adjusted earnings per share*** in year one, excluding any synergies
  • Transaction is expected to be financed with committed bank debt up to US $1.0bn ($1.36 billion*) in term loans with US $600m ($814 million*), up to US $200m ($271 million*) and US $200m ($271 million*) maturing 12, 18 and 24 months from closing, respectively; with leverage ratio of approximately 3.5x after closing and repayment of VettaFi debt, with plans to return to target leverage range two years post-close
  • TMX to assume US $100m ($136 million*) of VettaFi debt, which we plan to retire with funds made available to TMX under a new term loan
  • VettaFi will be included in TMX’s Global Solutions, Insights & Analytics segment

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Subject to customary closing conditions, January 2024 is when the transaction is due to be completed.

Evercore served as the exclusive financial advisor to the TMX Group. WilmerHale LLP acted as legal counsel to TMX Group, while the National Bank of Canada, The Toronto-Dominion Bank and Bank of Montreal are providing the required credit facilities to TMX Group. Barclays has acted as the exclusive financial advisor to VettaFi, and the legal counsel for VettaFi is Ropes & Gray LLP.

* Based on CAD/USD exchange rate of 1.3574 on 12 December 2023. Actual amounts in Canadian dollars are subject to change.

** VettaFi financial information is unaudited and provided by VettaFi management. It may not be prepared in accordance with IFRS for public companies.

*** Adjusted EPS excludes the impact of acquisition and related costs, integration costs, amortization of purchased intangibles, and other items.