IHS to Buy Carfax Owner for $1.4 Billion

Englewood, Colo.-based  IHS (NYSE: IHS  ) is buying Carfax.

Well, technically, it's buying the company that owns Carfax, the car-history service that provides 60% of the annual revenues of privately held R.L. Polk & Co. IHS announced Sunday night that it has signed a deal to acquire automotive information and analytics company Polk for $1.4 billion. Pundits in March had talked about a possible buyout price of about $1 billion.

The buyout is subject to closing conditions including antitrust clearance.

On Polk's $400 million in annual revenue, the purchase price works out to a price-to-sales ratio of 3.5, a steep discount to the 4.5-times-sales valuation of IHS's own shares. That discount may be explained by the fact that Polk's business is only growing in the high single digits, whereas analysts see profits at IHS growing at close to 18% annually over the next five years. Nonetheless, IHS says it expects the combined firm to be generating $500 million in annual free cash flow within the next six quarters.

The combined firm will be headquartered in Detroit, with 15 offices scattered across the globe. It will employ a total of about 1,300 workers. Polk is based in Southfield, Mich., with operations in Australia, Canada, China, France, Germany, Italy, Japan, South Korea, Spain, the United Kingdom, and the United States. Carfax created the Vehicle History Report in 1986 and maintains more than 11 billion vehicle records from more than 75,000 data sources across North America.

In business since 1959, IHS says "businesses and governments in more than 165 countries ... rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence."

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