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Filed
by MSCI Inc.
Pursuant
to Rule 425 of the Securities Act of
1933
and
deemed filed pursuant to Rule 14a-12
of
the Securities Exchange Act of 1934
Subject
Company: RiskMetrics Group, Inc.
(Commission
File No.: 1-33928)
The
following slides were used in connection with a webcast for investors
hosted by MSCI Inc. and RiskMetrics Group, Inc. on March 1,
2010:
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MSCI BARRA
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
RiskMetrics Group
March 1, 2010
slide00
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Important Information for Investors and Stockholders
This presentation does not constitute an offer to sell or the solicitation of
an offer to buy any securities or a solicitation of any vote or approval. MSCI
will file with the Securities and Exchange Commission ("SEC") a registration
statement on Form S-4 that will include a proxy statement of RiskMetrics that
also constitutes a prospectus of MSCI. MSCI and RiskMetrics also plan to file
other documents with the SEC regarding the proposed transaction. A definitive
proxy statement/prospectus will be mailed to stockholders of RiskMetrics.
INVESTORS AND SECURITY HOLDERS OF RISKMETRICS ARE URGED TO READ THE PROXY
STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT WILL BE FILED WITH THE SEC
CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL
CONTAIN
Investors and stockholders will be able to obtain free copies of the proxy
statement/prospectus and other documents containing important information about
MSCI and RiskMetrics, once such documents are filed with the SEC, through the
website maintained by the SEC at http://www.sec.gov. Copies of the documents
filed with the SEC by MSCI will be available free of charge on MSCI's internet
website at www.msci.com or by contacting MSCI's Investor Relations Department
at MSCI Inc., Attn: Investor Relations, 88 Pine Street, 2nd Floor, New York, NY
10005 (1-866-447-7874). Copies of the documents filed with the SEC by
RiskMetrics will be available free of charge on RiskMetrics internet website at
www.riskmetrics.com or by contacting RiskMetrics' Investor Relations Department
at sarah.cohn@riskmetrics.com (1-212-354-4643).
MSCI, RiskMetrics, their respective directors and certain of their executive
officers may be deemed to be participants in the solicitation of proxies from
the stockholders of RiskMetrics in connection with the proposed transaction.
Information about the directors and executive officers of RiskMetrics is set
forth in its proxy statement for its 2009 annual meeting of stockholders, which
was filed with the SEC on April 29, 2009. Information about the directors and
executive officers of MSCI is set forth in its proxy statement for its 2010
annual meeting of stockholders, which was filed with the SEC on February 23,
2010. Other information regarding the participants in the proxy solicitation
and a description of their direct and indirect interests, by security holdings
or otherwise, will be contained in the proxy statement/prospectus and other
relevant materials to be filed with the SEC when they become available.
[GRAPHIC OMITTED] (C) 2010. All rights reserved. 1
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Forward-Looking Statements This presentation contains forward-looking statements. These statements relate to future events or to future financial performance and involve known and unknown risks, uncertainties and other factors that may cause MSCI's, RiskMetrics' and the combined company's actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by these forward-looking statements. In some cases, you can identify forward-looking statements by the use of words such as "may," "could," "expect," "intend," "plan," "seek," "anticipate," "believe," "estimate," "predict," "potential," or "continue" or the negative of these terms or other comparable terminology. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond MSCI's, RiskMetrics' and the combined company's control and that could materially affect actual results, levels of activity, performance, or achievements. Such risks, uncertainties and factors include, but are not limited to: the risk that a condition to closing of the proposed merger may not be satisfied; the risk that a regulatory approval that may be required for the proposed merger is not obtained or is obtained subject to conditions that are not anticipated; the failure to consummate or delay in consummating the proposed merger for other reasons; the combined company's ability to achieve the synergies and value creation contemplated by the proposed merger; the combined company's ability to promptly and effectively integrate the businesses of RiskMetrics and MSCI; and the diversion of management time on merger-related issues. Other factors that could materially affect MSCI's, RiskMetrics' and the combined company's actual results, levels of activity, performance or achievements can be found in MSCI's Annual Report on Form 10-K for the fiscal year ended November 30, 2009 and filed with the SEC on January 29, 2010, in RiskMetrics' December 31, 2009 Annual Form 10-K which was filed with the SEC on February 24, 2010 and in their respective quarterly reports on Form 10-Q and current reports on Form 8-K. If any of these risks or uncertainties materialize, or if MSCI's or RiskMetrics' underlying assumptions prove to be incorrect, actual results may vary significantly from what MSCI or RiskMetrics projected. Any forward-looking statement in this release reflects MSCI's or RiskMetrics' current views with respect to future events and is subject to these and other risks, uncertainties and assumptions relating to MSCI's or RiskMetrics' operations, results of operations, growth strategy and liquidity. MSCI and RiskMetrics assume no obligation to publicly update or revise these forward-looking statements for any reason, whether as a result of new information, future events, or otherwise. The information provided herein may include certain non-GAAP financial measures. The reconciliation of such measures to the comparable GAAP figures are included on page 16 of this presentation. The following slides are part of a presentation by MSCI and are intended to be viewed as part of that presentation. The presentation is based on information generally available to the public and does not contain any material, non-public information. No representation is made that it is accurate or complete. The presentation has been prepared solely for informational purposes, is neither an offer to sell nor the solicitation of an offer to buy any security or instrument and has not been updated since it was originally presented. [GRAPHIC OMITTED] (C) 2010. All rights reserved. 2 slide02 |
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The Preeminent Investment Decision Tools Company
MSCI BARRA
[GRAPHIC OMITTED] [GRAPHIC OMITTED]
RiskMetrics Group
Industry [] Creates preeminent provider of industry-standard tools for
Leader equity performance and portfolio and risk management across
asset classes with combined revenues of $746MM(1) and combined
Adjusted EBITDA of $314MM(2)
--------------------------------------------------------------------------------
Comprehensive [] Combines highly complementary providers of risk management
Risk Platform tools for asset owners, asset managers, hedge
funds, and banks worldwide
--------------------------------------------------------------------------------
Holistic [] Enables seamless integration of portfolio and risk management
Investment functions across the investment process
Tools Solution
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Scalable [] Leverages combined data, analytics and software platform to
Growth accelerate growth and enhance profitability
Platform
Notes
1. Combined revenue figure reflects the sum of MSCI revenues for the fiscal
year ending November 30, 2009 and RiskMetrics revenues for the fiscal year
ending December 31, 2009
2. Combined Adjusted EBITDA figure reflects the sum of MSCI Adjusted EBITDA
for the fiscal year ending November 30, 2009 and RiskMetrics Adjusted
EBITDA for the fiscal year ending December 31, 2009. RiskMetrics Adjusted
EBITDA includes all stock based compensation and one time expenses.
Reconciliation of MSCI and RiskMetrics Adjusted EBITDA shown on page 16
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[GRAPHIC OMITTED] (C) 2010. All rights reserved. 3
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Significant Financial Benefits
Enhanced [] Expected to be immediately accretive to cash earnings per
Earnings share
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Cost [] Estimated $50MM of cost savings by 2012 from overlapping
Synergies support functions, market data, office locations and
administrative expenses
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Revenue [] Potential revenue synergies through cross-selling across
Synergies greatly expanded global client base
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Capital [] Strong combined free cash flow supports increased financial
Structure leverage
-- Capital structure rapidly delevers
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Financial [] Greater scale, broader client base, enhanced growth profile
and increased recurring revenue
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A Powerful Combination...
MSCI BARRA
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RiskMetrics Group
Complementary o Equity performance indices
Products o Equity portfolio analytics o Multi-asset class risk
o Multi-asset class risk analytics analytics
o Corporate governance
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Complementary Asset Owners Broker Hedge Funds
Client Bases Dealers
Asset
Managers Mutual Funds Banks
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Powerful [GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED]
Brands [GRAPHIC OMITTED] [GRAPHIC OMITTED]
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Enhanced Revenues: $443MM(1) Revenues:$303MM (1)
Geographic [GRAPHIC OMITTED] [GRAPHIC OMITTED]
Footprint
Note
1. MSCI revenues for the twelve months ended November 30, 2009 and
RiskMetrics revenues for the twelve months ended December 31, 2009
[GRAPHIC OMITTED] (C) 2010. All rights reserved. 5
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.. . . With a Comprehensive Product Suite
Complementary Front and Middle Office Diversified Platforms and Products
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Equity Fixed Income
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Primarily Office Front
Equity Indices Fixed Income Analytics
[] Benchmark indices to help measure [] Fixed income risk models and
performance and aid in portfolio software for portfolio construction
construction and as the bases for and to measure risk and return
investment products
Equity Analytics
[] Equity risk models and software for portfolio construction and to measure
risk and return
ESG Data and Analytics [] Credit Analytics
[] Environmental / socially responsible Portfolio credit exposure
research and analytics evaluation
through services that include
analytics, data and managed
services
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Multi-Asset Class Other
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Energy and Commodity Analytics
[] Risk and derivative valuation tools
to measure, manage and price risk
in energy and commodities markets
Primarily Middle Office
Multi-Asset Class Risk Analytics Financial Research
[] Multi-asset class platform for [] Accounting risk research, training,
portfolio risk analysis and due diligence accounting research
performance attribution services and legal risk and analysis
Multi-Asset Class Risk Analytics Governance Services
[] Standard for multi-asset class [] Proxy research and
financial risk measurement recommendations
[] Proxy voting services
Governance advice to
corporations
MSCI Products RiskMetrics Products
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Leverages Platform to Accelerate Growth
Businesses (2009 Revenues)(1)
Highly Scalable Platform
Equity Fixed Multi-Asset
Equity Portfolio Income Class
Indices Analytics Portfolio Risk
($260MM) ($123MM) Analytics Analytics
(~$15MM)(2) (~$186MM(3)
Platform
Data Models & Research Technology
Processing
Notes
1. MSCI revenues for the twelve months ended November 30, 2009 and
RiskMetrics revenues for the twelve months ended December 31, 2009
2. Includes $5MM of MSCI Fixed Income Analytics revenues reflected in Other
Products for reporting purposes and approximately $10MM of RiskMetrics
Fixed Income Analytics revenues, which is included in Risk segment
revenues for reporting purposes
3. Multi-Asset Class Risk Analytics revenues include $38MM of MSCI
Multi-Asset Class Portfolio Analytics revenues and $159MM of RiskMetrics
Risk segment revenues, excluding approximately $10MM of RiskMetrics Fixed
Income Analytics revenues included in Risk segment revenues for reporting
purposes
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Identified Synergies
Compensation [] Elimination of overlapping positions across broad range of
Expense functions
Savings [] Opportunity to relocate positions to emerging market
centers
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Non-Compensation [] Significant savings across data centers, network, market
Expense Savings data, occupancy, G&A and other public
company expenses
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Revenue [] Cross-sell opportunities across combined client bases and
Opportunities regional footprints
[] Creation of new products and product enhancements produced
from best-in-breed features
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[GRAPHIC OMITTED] (C) 2010. All rights reserved. 8
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Enhanced Scale and Growth Profile
MSCI (1) RiskMetrics (1)(2) Pro Forma MSCI
Revenues ($MM)
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MSCI (1) RiskMetrics (1)(2) Pro Forma MSCI
Revenues ($MM)
[GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED]
Adjusted EBITDA ($MM)
[GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED]
Notes
1 MSCI figures shown for the fiscal years ending November 30 and RiskMetrics
figures shown for the fiscal years ending December 31. RiskMetrics 2007
figure is pro forma to include ISS and CFRA for the full year
2 RiskMetrics Adjusted EBITDA includes all stock based compensation and one
time expenses. Reconciliation of Adjusted EBITDA shown on page 16
[GRAPHIC OMITTED] (C) 2010. All rights reserved. 9
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Increased Revenue Diversification
MSCI (1) RiskMetrics (1)(2) Pro Forma MSCI
Revenues(1)($MM)
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MSCI (1) RiskMetrics (1)(2) Pro Forma MSCI
Revenue Composition (1)
[GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED] Notes 1
MSCI revenues for the twelve months ended November 30, 2009 and
RiskMetrics revenues for the twelve months ended December 31, 2009 2
Represents ISS segment revenues 2 Subscription revenue represents RiskMetrics
recurring revenue as a percent
of total revenue
Subscription (Non-Market Based) Asset Based Fee Other
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Key Transaction Terms
Offer Price $21.75 comprised of $16.35 of cash and 0.1802 shares of MSCI
Per Share per RiskMetrics share
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Structure 75% cash / 25% stock to common shareholders
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Transaction $1.55Bn fully-diluted equity value (1)
Value
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RiskMetrics 11%-13% (2)
Shareholder
Ownership
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Transaction Existing cash plus up to $1,375MM in committed senior credit
Financing facilities comprised of $1,275MM Term Loan B and $100MM
revolving facility
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Conditions Approval of RiskMetrics shareholders, anti-trust clearance and
receipt of transaction financing
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Targeted Fiscal third quarter
Closing
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Notes
1 Reflects cash and stock consideration to RiskMetrics holders of common
stock, restricted stock and options. Restricted stock and options valued
at intrinsic value assuming Treasury Stock Method based on MSCI closing
price of $29.98 as of February 26, 2010
2 Pro forma fully-diluted ownership assuming issuance of 13.9MM - 16.3MM
MSCI shares. Exact number of MSCI shares issued will depend on number of
RiskMetrics options exercised prior to closing
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Capitalization Post Closing
Pro Forma Transaction Capitalization
Illustrative Sources & Uses
$MM
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Sources
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Existing Cash 642
Equity Consideration (1) 384
Transaction Debt 1,275
Total Sources 2,301
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Uses
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Purchase of Equity 1,547
Repayment of Existing Debt 668
Transaction Costs 85
Total Uses 2,301
MSCI Capitalization - Pro Forma For Transaction
Standalone Standalone Illustrative
MSCI RiskMetrics Pro Forma
$MM 11/30/2009 12/31/2010 MSCI
Cash 471 227 156
Total Debt 380 289 1,275
2009 Adjusted EBITDA(2) 215 99 314
Net Debt / 2009 Adjusted EBITDA 3.6x
Net Debt / 2009 Adjusted EBITDA + Run-rate Synergies (3) 3.1x
Free Cash Flow 153(4) 70 223
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Note: $100MM revolver remains undrawn
Notes
1 Assumes 75% cash / 25% stock consideration mix offered to all
fully-diluted RiskMetrics shares. Restricted stock and options valued at
intrinsic value. Assumes Treasury Stock Method and MSCI closing price of
$29.98 as of February 26, 2010
2 MSCI and RiskMetrics' figures for fiscal years November 30, 2009 and
December 31, 2009, respectively. RiskMetrics Adjusted EBITDA includes all
stock based compensation and one time expenses; reconciliation of Adjusted
EBITDA shown on page 16
3 Assumes $50MM of run-rate synergies
4 Excludes $35MM non-recurring payable to related parties; reconciliation of
free cash flow shown on page 16
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Financially Compelling to Stockholders
Illustrative Pro Forma Impact
2009 Illustrative Pro Forma Impact MSCI RiskMetrics
For the 12 Months Ended,
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($MM, Unless Otherwise Noted) 11/30/2009 12/31/2009 Combination Impact
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Revenue 443 303 Potential revenue synergies
Operating Expenses 266 213 $50MM run-rate synergies
Intangible Amortization Expense 26 23 Replaced by transaction
---------- ----------- intangible amortization
Operating Income 151 67
Interest Expense, Net and Other 19 20 Replaced by new $1.375Bn
---------- ----------- credit facility and
lower cash balances
Pre-Tax Income 132 47
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Net Income 82 31
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Cash EPS Adjustment Categories
Amortization of Intangibles
Non-Recurring Stock Based Compensation
Transaction-Related Non-Recurring Fees and Expenses
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Appendix [GRAPHIC OMITTED] (C) 2010. All rights reserved. 14 Slide13 |
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Powerful Combination(1)
Offices [] 21 offices in 15 countries [] 20 offices in 13 countries
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Employees [] 878 full time employees [] 1,140 full time employees
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Headquarters [] New York headquarters [] New York headquarters
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Clients [] 3,100+ clients [] 3,500+ clients
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Run Rate / ACV [] $461MM [] $283MM
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% Subscription [] 84% [] 93%(2)
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1 All figures as of November 30, 2009 and December 31, 2009 for MSCI and
RiskMetrics, respectively
2 Subscription revenue represents RiskMetrics recurring revenue as a percent
of total revenue
3 MSCI revenues for the twelve months ended November 30, 2009 and
RiskMetrics revenues for the twelve months ended December 31, 2009
4 Represents ISS segment revenues
[GRAPHIC OMITTED] (C) 2010. All rights reserved. 15
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GAAP Reconciliation
GAAP Reconciliation
MSCI Adjusted EBITDA Reconciliation
($MM, except per share data) 2007 2008 2009
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Adjusted EBITDA 159.1 194.8 215.1
Impairment of goodwill and intangible asset -- -
Founders grant expense 0.8 25.6 26.6
Amortization of intangible assets 26.4 28.5 25.6
Depreciation and amortization of property and equipment 2.0 5.0 12.0
Interest, other (income) expense, net (3.3) 26.1 19.3
Income tax expense 52.2 41.4 49.9
Net income 81.1 68.3 81.8
MSCI Free Cash Flow Reconciliation 2009
Net cash provided by operating activities 130.9
Purchased property, equipment and leasehold improvements (13.4)
Payable to related parties 35.0
Free Cash Flow 152.5
RiskMetrics Adjusted EBITDA Reconciliation(1)
($MM, except per share data) 2007 2008 2009
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Adjusted EBITDA 66.0 90.7 98.7
Impairment of goodwill and intangible asset - 160.1 -
Founders grant expense - - -
Amortization of intangible assets 19.1 21.8 23.4
Depreciation and amortization of property and equipment 7.4 8.8 8.3
Interest, other (income) expense, net 35.4 26.3 20.3
Income tax expense 1.7 10.7 15.6
Net income 2.4 (136.9) 31.1
RiskMetrics Free Cash Flow Reconciliation 2009
Net cash provided by operating activities 77.2
Purchase of property and equipment (7.1)
Payable to related parties -
Free Cash Flow 70.1
Note
1 Calculation of Adjusted EBITDA differs from that used by RiskMetrics,
which excludes all stock based compensation expense and one-time items
[GRAPHIC OMITTED] (C) 2010. All rights reserved. 16
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Illustrative Share Issuance
Illustrative Pro Forma Ownership Impact(1)
Lower Ownership Dilution Scenario (2)
Assumes All Exercisable Options are Exercised
Units MSCI Share Option Pro Forma
Outstanding Equivalents Proceeds FD Ownership
(MM) (MM)(4) Unit Type(s) ($MM)
(%)
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Common Shares Outstanding 63.4 11.4 Common Stock - 9.4%
Restricted Stock 0.2 0.2 RSUs - 0.1%
Exercisable Options 9.5 1.7 Common Stock 61.5 1.4%
Non-Exercisable Options 2.9 0.6 Options - 0.5%
Total RiskMetrics Equity Units 76.1 13.9 61.5 11.4%
MSCI Existing Fully-Diluted Shares 107.8 88.6%
Pro Forma Fully-Diluted Shares 121.7
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Higher Ownership Dilution Scenario(3)
Assumes Only RiskMetrics CEO's
Exercisable Options are Exercised
Units MSCI Share Option Pro Forma
Outstanding Equivalents Proceeds FD Ownership
(MM) (MM)(4) Unit Type(s) ($MM)
(%)
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Common Shares Outstanding 63.4 11.4 Common Stock - 9.2%
Restricted Stock 0.2 0.2 RSUs - 0.1%
Exercisable Options 9.5 4.1 Common Stock
& Options 3.3 3.3%
Non-Exercisable Options 2.9 0.6 Options - 0.5%
Total RiskMetrics Equity Units 76.1 16.3 3.3 13.1%
MSCI Existing Fully-Diluted Shares 107.8 86.9%
Pro Forma Fully-Diluted Shares 124.1
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Notes
1 Based on options outstanding as of February 25, 2010
2 Assumes all holders of exercisable options exercise their options, paying
the exercise price and receiving RiskMetrics common stock prior to closing
while all holders of non-exercisable options and restricted stock roll
their units into MSCI units at closing
3 Assumes only RiskMetrics CEO exercises his options while all other holders
of options and restricted stock roll their units into MSCI units at
closing
4 Represents shares issued on a gross basis and options on a fully-diluted
treasury method basis
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