S&P Global inc (SPGI) Q3 2021 Earnings Call Transcript

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S&P Global inc (SPGI 0.54%)
Q3 2021 Earnings Call
Oct 26, 2021, 8:30 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning. Welcome to S&P Global's Third Quarter 2021 Earnings Conference Call. [Operator Instructions] To access the webcast and slides, go to investor.spglobal.com. [Operator Instructions] I would now like to introduce Mr. Chip Merritt, Senior Vice President of Investor Relations for S&P Global. Sir, you may begin.

Chip Merritt -- Senior Vice President, Investor Relations

Thank you for joining today's S&P Global third quarter 2021 earnings call. Presenting on today's call are Doug Peterson, President and CEO, and Ewout Steenbergen, Executive Vice President and Chief Financial Officer. We issued a news release with our results earlier today. If you need a copy of the release and financial schedules, they can be downloaded at investor.spglobal.com.

Before we begin, I need to provide certain cautionary remarks about forward-looking statements. Except for historical information, the matters discussed in today's conference call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including projections, estimates and descriptions of future events. Any such statements are based on current expectations and current economic conditions and are subject to risks and uncertainties that may cause actual results to differ materially from results anticipated in these forward-looking statements. In this regard, we direct listeners to the cautionary statements contained in our Form 10-Ks, 10-Qs and other periodic reports filed with the U.S. Securities and Exchange Commission.

In addition, as announced late last year, S&P Global and IHS Markit entered into a definitive merger agreement. In March, shareholders of both companies overwhelmingly voted in favor of the merger. The merger is pending regulatory approval, and we currently expect to close in the first quarter of 2022. This call will touch on the merger, but does not constitute an offer to sell or buy or the solicitation of any offer to buy or sell any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to the registration or qualification under the securities law of any such jurisdiction. No offering of securities shall be made except by means of prospectus meeting requirements of Section 10 of the Securities Act of 1933.

In connection with the proposed transaction, S&P Global and IHS Markit has filed a registration statement on Form S-4 with the SEC, which includes a joint proxy statement and a prospectus. S&P Global and IHS Markit have filed other documents regarding the proposed transaction with the SEC. Investors and security holders of S&P Global or IHS Markit stock are urged carefully read the entire registration statement and joint proxy statement prospectus, which is available on our website and sec.gov.

In today's earnings release and during the conference call, we're providing adjusted financial information. This information is provided to enable investors to make meaningful comparisons of the corporation's operating performance between periods and to view the corporation's business from the same perspective as management. The earnings release and the slides contain exhibits that reconcile the difference between the non-GAAP measures and the comparable financial measures calculated in accordance with U.S. GAAP.

This call, especially a discussion of our outlook, contains statements about expected future events that are forward-looking and are subject to risks and uncertainties. Factors that could cause actual results to differ materially from expectations can be found in our filings with the SEC and on our website. I would also like to call your attention to a European regulation. Any investor who has or expects to obtain ownership of 5% or more of S&P Global should give me a call to better understand the impact of this legislation on investor and potentially the company. We're aware that we do have some media representatives with us on the call. However, this call is intended for investors and we would ask that questions from the media be directed to Ola Fadahunsi at 212-438-2296.

At this time, I would like to turn the call over to Doug Peterson. Doug?

Douglas L. Peterson -- President and Chief Executive Officer

Thank you, Chip. Welcome to today's third quarter earnings call. I'd like to start with some of the highlights of the quarter. We reported exceptional financial results with revenue increasing 13% and all four businesses delivering strong revenue and adjusted operating profit growth. Indices delivered the strongest revenue growth for the second straight quarter due to large gains in ETF AUM. Adjusted expenses increased 7%, largely due to investment spending, commissions and royalties. After raising guidance on both the first quarter and second quarter earnings call, we are raising 2021 guidance again based on these strong results and our expectations for the remainder of the year. Ewout will provide details in a moment.

I'd also like to share some additional highlights from the third quarter. The most important initiative of the year continues to be our upcoming merger with IHS Markit. This is an incredibly transformative opportunity for our company and our customers. The regulatory path to closing the merger is now becoming clearer. We launched S&P Capital IQ Pro and Platts Dimensions Pro and Sustainable 1, our ESG business is gaining momentum as we built internal capabilities and product offerings expand. I'll come back to all of these highlights in more detail, but let's start with the merger.

When we announced the merger in November 2020 we noted that we needed regulatory approval in five jurisdictions, Canada, The European Union, Taiwan, The United Kingdom and the United States. We've made substantial progress with all these regulators and there are a number of remedies we must undertake in order to complete the merger. IHS Markit will divest OPIS, the coal metals and mining and the PetroChem Wire businesses. The sale of these assets to News Corp has already been announced. In addition, IHS Markit must divest its Base Chemicals business. S&P Global must divest CUSIP Global Services and Leveraged Commentary and Data together with related family have leveraged loan indices. S&P Global and IHS Markit will begin the process of selling these additional businesses shortly in order to provide time. To undertake these sales processes we now expect to close the merger in the first quarter of 2022.

Collectively, the revenue from all of the businesses being divested is approximately $425 million and the margins for each of these businesses are higher than the margin for each of the divisions here in. In a moment, Ewout will provide an update on our merger synergy expectations and you'll see that despite these divestitures we are raising both our cost and revenue synergy targets.

To recap the financial results for the third quarter revenue increased 13% to $2.1 billion. Our adjusted operating profit increased 18% and our adjusted operating profit margin increased 250 basis points to 55.4%. As you know, we measure and track adjusted operating profit margin on a trailing four-quarter basis, which increased 130 basis points to 55.1%. As a result, our adjusted diluted EPS increased 24%. Each quarter we highlight a few key business drivers and important projects underway. This quarter let's start with ratings bond issuance trends.

During the third quarter, global bond issuance increased 3%. In the U.S. bond issuance in aggregate increased 6% as investment grade decreased 12%, high-yield decreased 16%, public finance decreased 24%, while structured finance increased 105% due to large increases in every category, particularly CLOs, which increased 340%. European bond issuance increased 4% as investment grade decreased 7%, high-yield decreased 4% and structured finance increased 70%, with gains in every asset class except RMBS, of particular note, CMBS increased 375%. In Asia, bond issuance decreased 2% overall. The data on this slide only depicts bond issuance, where will include new bank loan volumes overall global issuance increased 9%.

The next two slides look at the combined high-yield issuance and leveraged loan volume for the U.S. and Europe. Data is not readily available for the rest of the world. This slide shows that the combination of global leveraged loan and high-yield issuance in the third quarter continued to be very strong surpassing every quarter in 2018, '19 and '20. This slide depicts the combination of high-yield issuance and leveraged loan volume by the use of proceeds of the funds raised. This quarter both general corporate purpose and refinancing-related issuance was lower than the third quarter of 2020. The surge in activities entirely due to M&A, LBOs, buybacks and dividends. These are opportunistic categories that aren't pull forward. The surge in issuance is not pulling forward issuance from future years and is additive to future financing needs.

Since bank loan ratings are an important element of ratings revenue we like to disclose our bank loan ratings revenue each quarter. The unprecedented strength in bank loan ratings revenue continued in the third quarter and year-to-date revenues already surpassed any of the previous ten-full years. The leveraged loan market and the CLO market are dependent on one another as many of the leveraged loans end up in CLOs. As you can see here, CLO issuance continued to accelerate in the third quarter.

During the third quarter, we rebranded our Market Intelligence platform as S&P Capital IQ Pro. This recognizes the value of the Capital IQ brand as we continue to upgrade the platform with additional content and functionality. We currently have approximately 290,000 active desktop users, of which 90,000 are utilizing S&P Capital IQ Pro. The inaugural release of S&P Capital IQ Pro includes a number of capabilities not found in the Market Intelligence platform. A new Kensho-enabled document viewer incorporates AI-based search to speed up users discovery of text-based insights across filings and transcripts. It is based on technology that Kensho originally developed for U.S. security and military agencies and is now reengineered for S&P Capital IQ Pro.

For example, it gives investors the ability to quickly screen comments made over years of earnings calls within minutes. The new platform features frequent coverage of private markets, including data around fundraising trends, dry powder, fund performance and LP investor allocations, also included is the ability for users to screen on non-traditional industry criteria such as crypto, therapeutics and clean tech. S&P Capital IQ Pro also includes ratings direct coverage of corporates and financial institutions. Our users can now incorporate a full suite of S&P Capital IQ Pro tools and functionality and interact with S&P Global Ratings content in ways not previously possible.

Platts has been on a long journey to consolidate its product platforms as well with the acquisitions of Bentek, Eclipse, cFlow, Petromedia and others. There has been a tremendous effort to consolidate all of these capabilities into a single platform. This quarter Platts introduce Platts Dimensions Pro, which provides users with a seamless one-stop shop experience across Platts benchmark price assessments, news and analytics, spending 13 commodities, including energy transition and like S&P Capital IQ Pro this content is available on a web-based portal which is mobile friendly via machine-to-machine delivery and as an excel added.

Periodically, we like to provide updates on new product launches. The first two charts on this slide depicts the acceptance by market participants of our JKM marker for liquefied natural gas and our low-sulfur marine fuel assessment, both have exhibited very strong growth recently. The chart on the right shows the cumulative number of new assessments we've launched in the energy transition space in the last four years. These include a new suite of Australian hydrogen prices coming what is expected to be one of the key producers of this future fuel. The methane performance certificate which reflects production of natural gas in the U.S. with the zero methane emissions and upstream values for the measured carbon emissions associated with crude oil production in transportation covering initial suite of 14 crudes from around the world and aiming to provide the backbone for low carbon crude trading. Buyers can start to make active choices based on the relative carbon impact of different crude sources with this crude carbon intensity product.

Turning to our investments in ESG. Our Sustainable1 milestones and product launches continue to build. Third quarter Sustainable1 revenue increased 58% to $24 million versus the prior period. With the launch of second-party opinions Ratings now has five products. Overall, Ratings completed 10 ESG evaluations, 13 green evaluations, 13 SAM benchmark engagements and 11 social and sustainability framework alignment opinions in the quarter.

In Market Intelligence, we're close to wrapping up the annual CSA survey and so far in 2021 corporate participation increased 34% to over 1800 companies. On the back of these surveys we relaunched our S&P Global ESG scores on 8,000 companies during the quarter. We're targeting to have scores of more than 11,000 companies by the end of this year's assessment cycle in the first quarter of 2022.

In Indices, we had $26.5 billion of ESG ETF AUM at the end of the third quarter. This is an increase of 178% since the end of the third quarter of last year. Our Indices business also added to its ESG indices offerings with the launch of the S&P NZX 50 Tilted Index with the New Zealand Stock Exchange. Platts added products to both suite of carbon assessments and its recycled plastic offerings. And finally, S&P Global is a founding member of Novata, a new technology platform designed to provide private equity firms and the private markets with EFG measurement, data collection and benchmarking capabilities to help improve the management and tracking of ESG performance.

By providing rich detailed data on a wide array of ESG topics, the corporate sustainability assessment is an integral part of our ESG scores. Since we purchased the capability from RobecoSAM in late 2019 we've expanded the number of corporate participants by about 500 companies and the Group is almost doubled corporate participation in the last four years. Today's participating companies represent 45% of global market capitalization. In addition, you can see this is a global endeavor. We view the CSA input as a key differentiator to our Sustainable1 efforts.

Let me now turn to our outlook for global issuance and GDP. The 2021 issuance forecast continued to creep higher and is now relatively flat versus 2020 issuance. The latest forecast was issued earlier this week and also covers 2022 issuance for the first time. 2022 issuance is forecast to decline 2%. This is based on a 7% decrease in non-financial corporates, a 1% increase in financial services, a 3% increase in structured finance, and a 2% increase in U.S. public finance. Looking forward inflation concerns, prospects for rising rates, high cash balances and possible tax reform all translate to headwinds for issuance in 2022. We expect that they will lead to a second year of contraction in issuance totals. Please note that this is a bond issuance forecast. This is not a revenue forecast. For example, it doesn't address non-transaction revenue and doesn't include leveraged loan activity.

The macro outlook is little changed from three months ago, our economists expect growth to moderate in 2022 with growth in Europe and many emerging markets improving, while growth rates drop in the U.S. and China. Commodity prices have rebound due to strong retail sales, weather events and supply chain imbalances. However, inflation pressures appear to be peaking with some emerging market central banks raising rates, U.S. Federal Reserve moving up its tapering timeline and the ECB firmly on hold for now. Finally Platts Analytics believes that current fundamentals should remain supportive of oil prices in the mid-70s. This is positive for the health of the oil industry.

I will now turn the call over to Ewout Steenbergen, who is going to provide additional insights into our financial performance and outlook. Ewout?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Thank you, Doug. While we have excellent third quarter results and an exciting merger pending, I would like to start my discussion today with our latest thinking around our merger synergy targets. There has been an extensive effort throughout the company to identify and solidte potential merger synergies, while the initial synergy targets that we introduced at the time of the merger announcement were developed by a very limited number of senior managers, the latest figures take into consideration in depth planning and analysis by countless employees across both companies. We have increased our total synergy targets and now estimate that there will be $530 million to $580 million of cost synergies and $330 million to $360 million of revenue synergies.

As you can see in the slide, this takes into consideration new synergies identified as well as those who will no longer be able to achieve due to required divestitures. Correspondingly, the proceeds of the divestitures will contribute to additional capacity for share repurchases. I also want to point out that on a run rate basis, we have already achieved approximately $25 million of the synergies. This is primarily from not back filling open positions created through normal attrition. Today, we're only providing an update on the merger synergy targets. We'll give you a full update on the financial targets of the merged company after we complete the transaction.

Turning to our third quarter financial results. Doug covered the highlights of strong revenue and adjusted earnings-per-share growth. I will take a moment to cover a few other items. Adjusted corporate unallocated expenses increased 18% due to company-owned life insurance proceeds in the prior year period. Our net interest expense improved 13% due to the refinancing of a substantial portion of our debt last year. The decrease in the adjusted effective tax rate was primarily due to a refinement of tax accruals on foreign operations related to both a prior year and current period.

During the quarter, changes in foreign exchange rates had a positive impact on adjusted EPS of $0.02. The only meaningful impact was in Ratings, where adjusted operating profit was positively impacted by $5 million. In the second quarter, we introduced three new categories to provide insights into the type of expenses that are going to be incurred related to the pending merger. The first category is transaction cost. These are costs related to completing the merger. They include legal fees, investment banking fees and filing fees. The second category is integration cost. These are costs to operationalize the integration. They include consulting, infrastructure and retention costs. The third category is cost to achieve. These are costs needed to enable expense and revenue synergies. They include lease terminations, severance, contract exit fees and investments related to product development, marketing and distribution enhancements.

During the third quarter, the non-GAAP adjustments collectively totaled to a net pre-tax loss of $73 million, they included $9 million for merger transaction costs primarily legal fees, $45 million from merger integration costs primarily consulting fees, a $3 million gain on the sale of an office building in India and $21 million in deal-related amortization. This quarter all four divisions delivered solid gains in revenue and adjusted operating profit with Indices delivering the largest gains. On a trailing four-quarter basis, adjusted operating profit margin increased in all four divisions with Indices leading with a gain of 170 basis points. I'll provide color on the individual business results in a moment.

Now turning to the balance sheet. Our balance sheet continues to be very strong with low leverage and ample liquidity. We have cash and cash equivalents of $5.9 billion and debt of $4.1 billion. Our adjusted gross debt to adjusted EBITDA improved since the end of last year to 1.8 times. Free cash flow excluding certain items was $2.6 billion in the first nine months of 2021, an increase of more than $300 million or 15% over the prior year period. Due to the pending merger with IHS Markit share repurchases have been suspended.

Now, let's turn to the division results and begin with S&P Dow Jones Indices, which delivered extraordinary revenue growth of 28%, primarily due to gains in AUM linked to our indices. Please note that the ETF revenue included a $5 million break-up fee due to the termination of our indices as the basis for several ETFs. In the third quarter, adjusted expenses increased 4%, largely due to royalties and compensation, partially offset by reduced legal cost. The adjusted segment operating profit increased a whopping 40% and the adjusted segment operating profit margin increased 660 basis points to 71.8%. On a trailing four-quarter basis, the adjusted segment operating profit margin increased 170 basis points to 70.7%.

Every category increased revenue this quarter. Asset-linked fees increased 36%, primarily from gains in ETFs augmented by gains in mutual funds and insurance and over-the-counter derivative activity that exceeded 20%. Exchange traded derivative revenue increased 15% on increased trading volumes at the Cboe. Data and custom subscriptions increased 8%. For our Indices division over the past year ETF net inflows were $223 billion and market appreciation totaled $524 billion. This resulted in quarter ending ETF AUM of $2.5 trillion, which is 40% higher compared to one year ago. Our ETF revenue is based on average AUM, which increased 48% year-over-year. Sequentially versus the end of the second quarter ETF net inflows associated with our indices totaled $55 billion and market depreciation totaled $16 billion.

Exchange traded derivative activity was mixed during the quarter. Activity at the Cboe increased with S&P 500 Index options activity increasing 39% and fixed futures and options activity increasing 31%. Activity at the CME equity complex decreased 6% due primarily to a 22% decrease in Micro E-mini volumes. Ratings delivered very strong revenue growth, increasing 14% with strength in bank loan ratings, structured finance and non-transaction activity. Adjusted expenses increased 9%, primarily due to increased salaries, headcount at CRISIL, growth initiatives and incentives. This resulted in a 17% increase in adjusted segment operating profit and 160 basis point increase in adjusted segment operating profit margin. On the trailing four-quarter basis, adjusted segment operating profit margin increased 40 basis points to 63.8%.

In China, we see continued momentum and interest in our ratings. We completed 15 ratings in the third quarter, bringing the year-to-date total to 46 compared to 22 in all last year. Non-transaction revenue increased 15%, primarily due to growth in fees associated with surveillance, increased new entity ratings activity, CRISIL and Rating Evaluation Services revenue. Transaction revenue increased as a 150% increase in bank loan ratings activity and strong structured product issuance more than offset the decline in corporate bond issuance.

This slide depicts Ratings revenue by its end markets. The largest contributor to the increase in Ratings revenue was the 48% increase in structured finance, driven by CLOs, CMBS and the ABS. In addition, corporates increased 14%, financial services increased 8%, governments decreased 12% and the CRISIL and other category increased 14%. Market Intelligence delivered reported revenue growth of 7% and 8% on an organic basis. More than one-third of the revenue growth was one recent product investments, which increased by 40%, led by EFG and the S&P Global Marketplace.

Adjusted expenses increased 4%, primarily due to higher investment spending, particularly in ESG, S&P Global Marketplace, SME and China. Additional infrastructure spending supporting our cloud initiatives and S&P Capital IQ Pro and data, which is primarily license fees tied to aftermarket research revenue. Adjusted segment operating profit increased 13% and the adjusted segment operating profit margin increased 190 basis points to 35.7%. On the trailing four-quarter basis, adjusted segment operating profit margin increased 90 basis points to 33.8%.

Looking across Market Intelligence, there was solid growth in each category, desktop revenue grew 6%, data management solutions revenue grew 12%, credit risk solutions revenue grew 7%. Now turning to Platts, reported revenue increased 8%, our core subscriptions increased 7%. It is notable that more than one-third of the growth came from new products primarily ESG and LNG. Global Trading Services had a great quarter, increasing 14% mainly due to strong LNG and petroleum volumes. GTS activity often picks up when commodity prices become more volatile. Adjusted expenses increased 11%, primarily due to growth initiatives, incentives and commissions. In addition, expenses in the third quarter last year were aided by management actions.

Adjusted segment operating profit increased 5% and adjusted segment operating profit margin decreased 110 basis points to 54.6%. The trailing four-quarter adjusted segment operating profit margin increased 70 basis points to 55.6%. While there was revenue growth in every category, petrochemicals, natural gas, power and renewables, and shipping all delivered double-digit growth. Because the company now anticipates closing the merger with IHS Markit in the first quarter of 2022, we're able to provide 2021 GAAP guidance for the first time.

This slide depicts our new GAAP guidance and this slide depicts our adjusted guidance. Third column shows our new 2021 adjusted guidance with all the line items to changed highlighted. We're making these changes primarily due to greater revenue growth in Ratings and Indices. Therefore, our revenue guidance is increased from high single-digit increase to a low double-digit increase. Corporate unallocated is increased by $5 million to a new range of $140 million to $150 million due to increased incentives and the charitable contribution. Operating profit margin is increased by a range of 40 to 60 basis points to a new range of 55% to 55.5%. This results in a $0.50 to $0.55 increase to adjusted diluted EPS guidance to a new range of $13.50 to $13.65. And finally, free cash flow generation has been increased by $100 million to a range of $3.6 billion to $3.7 billion. In conclusion, 2021 is turning out to be an exceptionally strong year for the company. All our businesses are delivering solid growth, we continue to expand our ESG product offerings and we're making great progress on the upcoming merger with IHS Markit.

And with that, let me turn the call back over to Chip for your questions.

Chip Merritt -- Senior Vice President, Investor Relations

Thank you. [Operator Instructions] Operator, we will now take our first question.

Questions and Answers:

Operator

Thank you. Our first question comes from Manav Patnaik with Barclays. Your line is open, ma'am.

Manav Patnaik -- Barclays -- Analyst

Thank you. I just had a question on the Capital IQ Pro platform that you talked about. It seems like that's been in the works for some time, perhaps it's out a little bit later than you guys had anticipated. But just talk about how you think that improved your competitive positioning, is there any changes in that side of the market from the competitive angle.

Douglas L. Peterson -- President and Chief Executive Officer

Thank you, Manav. This is Doug. Well, first of all welcome everyone to the call. We had a lot to report today and I'm pleased that you picked up that we've been able to launch Capital IQ Pro platform. It -- what it brings is the ability to, first of all, consolidate on many, many different information sources that we've had in the company across the years. It has a much better interface that you've seen if you started using it. It also incorporates new Kensho capabilities to improve search. It also has the data for ESG. It is easier to use for our risk services data. So across the board it provides us with a competitive advantage of comprehensive data, ease of use, as well as new tools that make it easier to download data to move them into spreadsheets for charting, etc. So, we think it's a -- it's an incremental leap forward and gives us a much more competitive platform for the market.

Manav Patnaik -- Barclays -- Analyst

Got it. And then, Doug, just on the issuance forecast for next year. I know you gave us the moving pieces by category. But just higher level from a macro standpoint, I mean, down 2% volume doesn't sound that bad compared of the strong two years that we've had, but just curious on where you think the positives and negatives could be to that number.

Douglas L. Peterson -- President and Chief Executive Officer

Yeah. This is something, as you know, we've seen a really interesting mix of the issuance this year. You saw the very strong issuance in loans which is driven by M&A. We've seen so far in the quarter, we saw a drop of corporates of 30%, while we saw an increase of structured finance of over 100%. So, that's -- those are really big swings. We do see that the M&A activity should continue forward. There is a lot of M&A activity in the pipeline which would bode well for loan issuance. That's not something that's in the bond forecast itself.

But in the bond forecast, we see that in corporates it's going to be down about 7%, other continues to be a strong liquidity for those types of issuers. The trend is right now there is not a very big pipeline of issuance of corporates that we see. Financial services had have strength the last couple of quarters. As you saw this quarter financial institutions was up about 5%. In the U.S., it was actually up about 30%. So, you did see some strength in that. So, we do think that there is going to be some continuation up about 1%, sorry, 1% for 2022.

For structured finance, we do think that there's going to be some continuation of interest in CLOs, but I'm not sure if that will continue across all asset classes with about a 3% increase. U.S. public finance close to flat, but around 2%. And then finally, total if you look across all of those given the volume of corporates, which we had down 7% that would bring the total down about 2% in 2022. And as we said on the call, this is a initial issuance forecast of bonds. It's not a revenue forecast.

Manav Patnaik -- Barclays -- Analyst

Understood. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Manav.

Operator

Thank you for your question. Our next question is from Kevin McVeigh with Credit Suisse. Your line is open.

Kevin McVeigh -- Credit Suisse -- Analyst

Great, thanks so much. Hey, congratulations on the results. Doug, you talked about ESG just within the context of longer term opportunities. I mean, you're scaling -- it seems like the revenue was $24 million, up from $22 million, and I think in the past you've talked about $100 million target and exceeding kind of $300 million by 2024, you still comfortable with that. And is there potential just puts and takes on that as we think about bringing in IHS to the extent you can talk about that.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Good morning, Kevin. This is Ewout. Let me first take the first part of your question and then I will hand it over to Doug.

Kevin McVeigh -- Credit Suisse -- Analyst

Thank you.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

First, with respect to the revenue outlook for ESG for the full year, yes, we are still expecting to come in approximately $100 million of revenues for the full year. And one of the reasons is that there is some seasonality with respect to some revenue. Usually it's a bit higher in the fourth quarter. So, were year-to-date at $67 million of ESG revenues, and again, we expect this to go up in the fourth quarter to approximately $100 million for the full year. So, we are on track with respect to our forecast over 40% CAGR that we expect over the next few years. And you see that we have a lot of positive momentum, a lot of new product launches, a lot of new initiatives going on, a lot of investments in ESG initiatives. So, let me hand it over here to Doug.

Douglas L. Peterson -- President and Chief Executive Officer

Thank you, Kevin. Just a couple of points strategically in our -- for our positioning. We have been able to put together the Sustainability1 group under the leadership of a Martina Cheung and this has provided us with the ability to look across the entire organization for ways that we can link data and put together the latest needs for the market. As you saw, we launched the partnership with the Ford Foundation, Hamilton Lane and Omidyar of the Novata platform for the private markets and private equity. So, we're looking across all the different types of opportunities to bring ESG data into the market, so you have the most transparency, the most comprehensive consistent approach to providing those ESG solutions to the market.

So, this is something that we're looking at across the board in all the different aspects of how markets are starting to use ESG data. You should expect that we're going to continue to invest in this area. You should hear from us every quarter that we've spent some money or invested in a different division to increase our sales force, our technical capabilities. And if you ask the question about where might we are still be targeting some longer term look at acquisitions EFG would clearly be on that list.

Kevin McVeigh -- Credit Suisse -- Analyst

Super helpful. And then just real quick, it seems like you're able to walk up the cost synergies and even the upper end of the revenue synergies despite some additional divestments to get the deal over the goal line, any thoughts on kind of the broader, I guess, categories of what the expense synergies are, and then maybe where some of that revenue comes in as well. Is that just -- is you're kind of coming together or just any thoughts as to what drove that upside there.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Kevin, the short answer here is that based on a lot of bottoms up work they large groups of people with a lot of rigor substantiating synergy opportunities we have been able to find a higher opportunities than we thought before. So, let me expand a bit on that. You recall when we announced the transaction, we said that we had $350 million of revenue synergies and $480 million of cost synergies. That was based on very thorough process during due diligence. However, that was done by a smaller group of senior executives, because of course a smaller with people were aware that we're working on that transaction.

Since then we have had work streams in place and four submission rounds with respect to synergies through a very rigorous process and we have been able to look much deeper into all the synergy categories from integrating corporate functions to optimizing real estate and technology, going very deep in procurement to clean room activities, procurement, I already mentioned, eliminating duplicative costs so many of those areas. And based on all of that very detailed work, we are confident now that we can raise those synergy targets both for cost and revenues.

Kevin McVeigh -- Credit Suisse -- Analyst

Thank you so much. Congrats again.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Kevin.

Operator

Thank you for your question. Our next question is from Andrew Nicholas with William Blair. Your line is open, sir.

Andrew Nicholas -- William Blair -- Analyst

Great, thank you. Maybe I'll start with a follow-up to the last question, which is just on the timing of cost synergies. I believe of the $480 million that you'd outlined initially $390 were expected in the first two years. This additional $100 million or so, is that kind of a first two year opportunity or is that part of a longer tail?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Good morning, Andrew. What we are looking at is very similar trajectories with respect to expense synergies and revenue synergies that we told you before. So, three year cost synergy ramp, which is more front-end loaded and then five year rent for revenue synergies, which is more gradual over that five year period of time.

Andrew Nicholas -- William Blair -- Analyst

Understood. Thank you. And then my next question, appreciate you taking them, was just on the implied guidance for fourth quarter spend. Obviously, after a really good quarter, it still looks like you're expecting more acceleration in spend. So, I'm just wondering, one, what the major drivers of that increased spend are in the fourth quarter and then also as a jumping-off point for 2022?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Sure. Well, I have to be careful about 2022, because we're not providing guidance on that at this point in time. But let me give you some more details about the outlook for the remainder of the year. So, what you see, Andrew, is a bit of the direction of different initiatives going in opposite direction. So, first, we have the productivity program, where we take benefit so far this year from an expense growth perspective as well as the pre-realized synergies on the S&P Global site that we mentioned in the prepared remarks, and of course, we're also taking benefit from the operating leverage.

But what goes in the opposite direction is the strategic investments we're making and the strategic initiatives, for example, in EFG, for example, in the energy transition in Platts. And then also our variable expenses are going up. I consider those good expenses because they are directly linked to our sales levels and our revenue levels so think about incentive compensation commissions and cost of sales. So, we expect those underlying trends to continue in the fourth quarter, specifically, I would like to call out Platts, because the Platts expenses might be a little higher in the fourth quarter similar to what you saw in the third quarter, because here you see particularly those variable expenses being a bit higher as well as the investments in the new initiatives. But that is also paying off, because as we mentioned, one-third of the revenue growth in Platts is coming from those new products. I hope that's helpful.

Andrew Nicholas -- William Blair -- Analyst

Yes, it is. Thanks a lot.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Andrew.

Operator

Thank you for your question. Our next question is from Hamzah Mazari with Jefferies. Your line is open.

Hamzah Mazari -- Jefferies -- Analyst

Good morning. My question was just around, if you could just update us on the capital allocation framework going forward. I know the deal timeline is sort of Q1. You also outlined how much free cash flow generating this year. Just update us on your thoughts on return of cash post deal closing. And then have the cost to achieve synergies changed at all with the updated cost synergy figures?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Hamzah, good morning. So, let me first take the capital return philosophy. Yeah, absolutely right that we are building up significant cash as a company. And our thinking about returning that, because obviously this is temporarily elevated, returning that cash to thinking about that is the following. So, first, we have a catch up to do, because for the last one and half years we have not been able to do share buybacks and the same applies, by the way, for IHS Markit. So, IHS Markit can also not do share buyback. So, it's also building up its cash position.

Then what we should add is some of the proceeds of the divestitures that will help with the capital return capacity. And then very quickly after the completion of the transaction we would like to move to our new capital return target of at least 85% of free cash flow. So, if you add up all of those pieces, then we are speaking about a very meaningful capital return number that we will be able to achieve after the completion of the transaction. I cannot give you a numerical answer on that right now. But what we are planning to do is give you the financial targets of the combined company in the first quarter again after we complete the merger.

With respect to your second part of the question, the cost to achieve. So, we are looking still at those three different categories with respect to our merger-related cost, so we have transaction cost, integration cost and cost to achieve. Cost to achieve in my view are of course the best category of cost, because it's an investment to ultimately achieve those synergies. What we are looking at in terms of the overall best estimates with respect to the spend, the integration costs and the cost to achieve combined. We're looking at approximately 1.1 times the overall cost and revenue synergies. So, that's our best estimate in terms of what we expected to spend for integration and cost to achieve. But again that is an investment in order to achieve ultimately those higher synergy numbers.

Hamzah Mazari -- Jefferies -- Analyst

Very helpful. And my follow-up question, I'll turn it over is just around the China ratings business. I know you outlined sort of completing 15 domestic ratings, but do you view that environment as having changed for your business or are not really? A lot of the headlines around China are a little more -- it seems like it's tougher, but maybe it doesn't impact your business domestically, so just any thoughts there.

Douglas L. Peterson -- President and Chief Executive Officer

Yeah. Thanks, Hamzah, nice to hear from you. And as you mentioned, we did complete 15 ratings in the third quarter. It's actually 46 year-to-date and that compares to 2022 and all of 2020. So, we know that growth isn't going to be a straight line. There is a lot of interest in our ratings as you see there is some credit events taking place in China right now and those are bringing a lot of attention to our ratings and our methodology, how we think about informing the market. We see a big uptick in people attending our webinars, downloading our research. And we've also been of pleased that we've been able to rate companies across the entire credit sector from AAA to BBB, and then different types of companies financial, structured products and our first non-financial corporate.

But more to your question about the environment, we continue to see the financial regulators are very interested in reforming and updating their financial markets. We would see that when it comes to the ratings industry that there is interest in seeing more from us. They're talking about some reforms that would make the ratings industry more transparent and make it changed some of the floors for what would be defined as a non-investment grade rating. But very importantly we also see a whole slew of international financial firms getting licenses to operate 100% owned or more than 51% owned of operations in China. Recently Goldman Sachs received approval to take full ownership of its securities, a JV, others include Fidelity, JPMorgan, Citi, BlackRock, etc. So, we do think that in the financial markets we see a very different rhetoric and the willingness to open reform in the markets compared to what you see sometimes in other parts of the markets.

Hamzah Mazari -- Jefferies -- Analyst

Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Hamzah.

Operator

Thank you for your question. Our next question comes from Ashish Sabadra with RBC Capital Markets. Your line is open.

Ashish Sabadra -- RBC Capital Markets -- Analyst

Thanks for taking my question. Just on the divestiture and the $420 million of revenues for the divestitures. I believe the ones that are already announced OPIS, CMM and PetroChem those were $129 million. I just wanted to confirm that that number is still right and I was wondering if you could provide any incremental details on the other businesses, any further details on revenues for other businesses. Thanks.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Good morning, Ashish. Indeed that number is still correct. Approximately $125 million revenue for OPIS and its related businesses like the coal metals and mining, and as Doug said in his prepared remark, $425 million for all of the divestitures, including OPIS combined.

Ashish Sabadra -- RBC Capital Markets -- Analyst

Okay, that's helpful. And then just a question on the Cap IQ Pro, obviously, that's getting pretty good traction with the roll out there. My question was, how does that help you post the integration with IHS Markit? Does it make it easier for you to cross sell IHS is data into the Cap IQ customer base with the roll out of the IQ Pro, a pretty solid roll out of the IQ -- Cap IQ Pro platform?

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Ashish. It definitely does. Having the Capital IQ Pro developed and delivered is important to us. It gives us confidence of our ability to integrate new datasets. It also is something that's on the desktop of already 90,000 users which is growing rapidly. We believe that that gives us the ability to integrate new datasets. As you know, related to the Market Intelligence business we also have the data marketplace which has the titles for different datasets which already curated, have the contracts around them, that's another aspect of the Market Intelligence business. It is going incredibly well. That will help us integrate the data lake and the data products also of IHS Markit. So, the progress technologically how we've moved our operations to the cloud, the upgrade and updates we've been doing to the back-end as well as now the ability to deliver that front-end of S&P Capital IQ Pro are all going to help facilitate the integration. Thanks, Ashish.

Ashish Sabadra -- RBC Capital Markets -- Analyst

Thank's very much.

Douglas L. Peterson -- President and Chief Executive Officer

Thank you very much.

Ashish Sabadra -- RBC Capital Markets -- Analyst

Thanks a lot. Thank you. Congrats.

Operator

Thank you for your question. Our next question is from Jeff Silber with BMO Capital Markets. Your line is open, sir.

Jeffrey Silber -- BMO Capital Markets -- Analyst

Thanks so much. Wanted to switch over to the Indices business. The performance is really been remarkable the past few quarters and I think you've had three straight quarters of adjusted operating margin above 70%. Is that the new bar going forward? Is that sustainable?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Hello, Jeff. This is Ewout. With respect to the outlook for margins for Indices, I can only give you the outlook for 2021 and that is approximately 70% margin for the full year and we will get back to you in the first quarter when we do our fourth quarter earnings call with respect to specific guidance for 2022.

Jeffrey Silber -- BMO Capital Markets -- Analyst

Okay. I thought I'd try, but thank you. And then just moving back to the merger, can you just remind us where we stand in terms of milestones, in terms of what we're looking for over the next few months.

Douglas L. Peterson -- President and Chief Executive Officer

Let me take that. And what we're looking over the next few months is to continue to meet the requirements that we've agreed with the regulators on -- in the -- on where we're going to be divesting of some businesses so that we can close the transaction. As you saw this week or last week, we were able to reach some agreements with the EC for the approval of some conditions and what they call remedies, which include the divestiture of OPIS that they include what's now the divestiture of CUSIP and then also LCD and loan indices. We have about six months from now to close the LCD and the loan indices and those are not conditions to close the transaction CUSIP is.

And then with the CMA in the U.K., we also have the condition of the OPIS transaction and now something else that's being added that's called Base Chemical. And well we heard from them this morning that in general they proof that as a remedy that they would expect meets the needs. We also want to make sure that over the next three or four months that we have time to follow through on a very thorough and robust process to get full value for all of these divestitures.

So, in a sense right now getting those divestitures, meeting the requirements of those regulators, the remedies that they saw that created competitive positions that they thought it would be too strong. Completing those divestitures is going to be the gating factor. But we also want to do it, as I said, in a way that's professional, robust and we get full value. So, you should be watching that. We'll be providing more information as things crop up that we can talk about, but be assured that this is something that's on the top of our list right now things we have to get done.

Jeffrey Silber -- BMO Capital Markets -- Analyst

Okay. Really appreciate the color. Thanks so much.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

If I may, build on Doug's answer, with respect to milestones, we also have a force to milestones around the merger planning process. And I think we are well underway. A lot of positive initiatives that are going on in both organizations. And we are looking at, for example, getting ready for day one and being able to operate as one combined company on day one, system integrations, people planning, synergies and to loan. So, also a lot of milestones that we are working on, on the more overall planning process.

Jeffrey Silber -- BMO Capital Markets -- Analyst

Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Jeff.

Operator

Thank you for your question. Our next question is from Toni Kaplan with Morgan Stanley. You may proceed with your question.

Toni Kaplan -- Morgan Stanley -- Analyst

Thank you. I wanted to ask about the recurring revenue within the Ratings business is very strong again at 15%, fourth quarter of double-digit growth. Going forward, should we expect sort of a similar growth rate there? And just broadly, has there been any change from issuers when deciding whether to enter a frequent issuer program, especially as debt balances continue to rise or how does that not really changed at this point?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Good morning, Toni. Indeed very positive, continued positive revenue growth in the non-transaction category for Ratings and we also expect that to continue for the full year. So, the outlook for non-transaction revenue is now low double-digits growth. What you see is underneath is a couple of developments. First, we are seeing that surveillance fees are going up. That is being helped last year by the very high level of bond issuance activity and this year of course by bank loan rating activity, where we also are receiving surveillance fee. So, indeed, some part of that you may expect to also continue in the future beyond 2021. Then what we also see as a lot of activity with respect to initial credit ratings this year, Rating Evaluation Surface, which is held by the M&A environment and then CRISIL also is doing very well and is also showing very healthy growth. So, all of the underlying categories in non-transaction revenue doing very well.

Toni Kaplan -- Morgan Stanley -- Analyst

That's really helpful color. And just for my follow-up, given that, I know you're less exposed to sort of some of the labor pressures we're seeing across some of our diversified names, but that being said, can you comment on, if you're seeing any headwinds on the labor side, is it harder to find people just wanted to understand what's going on with your employment.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Absolutely, Toni. We are monitoring this very closely at both indeed from a quality of people that we can attract and retain as well as overall from a cost perspective, because of course the largest cost category we have is staff cost as a company. It's about 70% of our overall cost base. We, by the way, see this both as a risk and as an opportunity, because if there are a lot of people in the labor markets. It's also a clear opportunity to pick up some really good talent as a company. Moreover with the hybrid working model that we are introducing, we also think that it is attractive as an employer that we can offer that, and it also offers up on the possibility to look at talent in a much wider geographical area that we're looking at before. So, we are closely monitoring this. At this point in time our economists believe that the inflation pressures should be transitory. So, that's more our base case. But we're definitely running stress test to think about if inflation would be more permanent what that would mean for the company and what management actions we can take.

Toni Kaplan -- Morgan Stanley -- Analyst

That's great. Thank you so much.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Toni.

Operator

Thank you for your question. Our next question is from Craig Huber with Huber Research Partners. Your line is open, sir.

Craig Huber -- Huber Research Partners -- Analyst

Yes, hi. My first question, typically, you guys raise prices on average 3% to 4% per year for your legacy businesses share is that a reasonable range? And is there any areas around that are significantly higher or lower than that? Then I've a follow-up. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Craig, as you know, we typically will price somewhere around 2% to 3%. We try to look at what are the trends in the markets on inflation, but that would continue to be our expectation going forward. But we don't have any further guidance or update on that right now.

Craig Huber -- Huber Research Partners -- Analyst

Okay. Then my other question, Doug, your outlook for debt issuance this upcoming year is, I guess, down 2% excludes bank loans, if I heard you right. Can you just comment if you would what's your best assessment. How do you think bank loan issuance will do next year given the huge strength you guys have seen this year? Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

I don't have the bank loan issuance forecast from the team. And I do -- I would only say that we do see a very strong pipeline for M&A and LBOs that is always one of the most important elements that figures into that. But we'll be providing more guidance on that at our next earnings call.

Craig Huber -- Huber Research Partners -- Analyst

Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Craig.

Operator

Thank you for your question. Our next question is from Andrew Steinerman with JP Morgan. Your line is open, sir.

Andrew Steinerman -- JP Morgan -- Analyst

Hi. I'll be quick. Ewout, could you just help us a little bit more understanding of the fourth quarter, just a comment about the four segments and how they're likely to do on organic revenue growth basis to puzzle into the full-year '21 guide that you gave on Slide 43.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Sure, Andrew. We are looking now at outlook with respect to revenue growth for our divisions. The Index business double-digit revenue growth, Ratings low double-digit, we have Platts at high single-digits, and we have MI at mid to high single-digits. And then with respect to the margin outlook for the full year, we have, as I said before, Indices around 70%, Ratings mid-60s, Platts mid-50s and then MI mid-30s. So, continued positive momentum, healthy top line growth and healthy margins for all of our segments.

Andrew Steinerman -- JP Morgan -- Analyst

Perfect. Thank you so much.

Douglas L. Peterson -- President and Chief Executive Officer

And that's for the full year, correct Ewout.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Those are full year, correct.

Andrew Steinerman -- JP Morgan -- Analyst

Okay. We'll puzzle into fourth quarter. Thanks for highlighting that. Appreciate that.

Operator

Thank you for your question. Our next question is from George Tong with Goldman Sachs. Your line is open.

George Tong -- Goldman Sachs -- Analyst

Hi, thanks, good morning. You have not increased your guidance for debt issuance and Ratings revenue of three quarters in a row. Why shouldn't the factors that drove outperformance persist into 2022?

Douglas L. Peterson -- President and Chief Executive Officer

I don't have any reason whatsoever to try to give a forecast in 2022 right now. That goes beyond what our own team who are the people in the markets every day have looked at. Clearly, there is a lot of factors which go into the decision of organizations to issue debt or to undertake an M&A deal and what sort of instrument that they undertake to finance it with, whether it's a loan, how they gets packaged in CLOs, etc. There is a lot of liquidity in the market. We do see a strong M&A pipeline right now. And so those are things that will factor in when we bring you the full year update in our guidance on our next earnings call.

George Tong -- Goldman Sachs -- Analyst

Okay, got it. You increased your synergy target associated with the INFO merger. Which businesses do you expect these incremental synergies to come from predominantly or is it relatively evenly spaced across the business?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

George, it will be across the board in many different categories in all of the segments as well as also in the functional areas. Let me give you a couple of examples of that so that you can get the more a feel behind it. So, first, a lot of work has been underway in what we call the procurements clean room. So, about $2.5 billion of spend of both companies has been analyzed there, 25,000 active contracts and that has led to some opportunities, further opportunities that have been identified. Also, there is a clean room for cross-sell and we have found about 200 synergies with respect to cross-sell through that clean room activity. And then what we did not expect before was short and synergy benefits from segments that we basically did not have on the list before. So, we now have synergies also being identified in Ratings, in transportation, in CMS and in CRISIL. So, those are a couple of examples. But I would say, in general, really more opportunities in all of the areas across both organizations and of course then the combined company in the future.

George Tong -- Goldman Sachs -- Analyst

Great. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, George.

Operator

Thank you for your question. Our next question is from Owen Lau with Oppenheimer. Your line is open, sir.

Owen Lau -- Oppenheimer -- Analyst

Thank you. I'll be quick. Could you please talk about the rationale behind how you come down to the conclusion to divest CUSIP and LCD. And then all these divestitures contingent to the completion of the INFO deal. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Yeah. Thank you, Owen. Well, as you know, these are businesses that the EC and the CMA have looked at with a lot of depth. They go to the market. They go to market participants to ask them to look at the businesses as we bring them together and to give them feedback as to what would look -- what would be the competitiveness of those businesses. So, when it comes to the discussion with the EC they determined that CUSIP and LCD in the loan indices would create some sort of an additional competitive advantage and in the discussions with them and looking at their understanding and belief of the market position we agree that that would be a remedy that would meet their needs to ensure that we didn't have a dominant position in the markets. So, this is a -- this is something that they looked at.

You can actually read their letter that has been published that they have a very short couple of paragraphs to describe their views of that and how they feel about it, but they've also given us what they call an approval with conditions which we think was a very positive aspect. Similarly, with the CMA, they go to the market, they listen the market participants and they came back with the discussion about the Base Chemicals business that would also create a competitive issue in the U.K. and in discussions and negotiations with them. We also agreed that that would be a condition that we would meet in order to get approval on the transaction. So, these are what the regulators do, they look at the market, they speak with market participants and then we discuss things with them, and in these cases, we've agreed that we would make these divestitures in order to close the deal.

You asked about conditionality, it's our understanding, in the case of the of the CMA, we would need to have a buyer identified that they would that of the Base Chemicals business and also the OPIS business in which we already have a buyer. And in the case of the EC, we have to have a buyer identified for their OPIS and related businesses, which we already have. And then for CUSIP, we'd have to have a buyer -- we have identified embedded before we can close the deal. But for LCD and loan indices, we have six months from now and we could close the deal without having that -- without having a buyer for that transaction.

Owen Lau -- Oppenheimer -- Analyst

That's very helpful. Thank you very much.

Douglas L. Peterson -- President and Chief Executive Officer

Thanks, Owen.

Operator

Thank you for your question. Our next question is from Jeff Meuler with Baird. Your line is open, sir.

Jeffrey Meuler -- Robert W. Baird -- Analyst

Yeah. Thank you. On the Cap IQ and Platts upgraded platforms, as you upgrade an existing client, is there incremental revenue at the point of upgrade or is this all about driving usage and then you capture the better monetization on the back-end? And then on the expense side, is there a sizable opportunity to save on cost as you fund some of the legacy platforms eventually?

Douglas L. Peterson -- President and Chief Executive Officer

There is a few aspects to this. One is related to something you mentioned and that is that as we improve our capabilities to make it easier to find data, to search it, to chart it, to download it etc, that makes the product more sticky, it makes more people use the product, that brings more people to the platform, which is a virtuous cycle which then allows us to have stronger negotiations when it comes to price increases. So, there is not necessarily a direct increase that comes from the launch of these platforms, but it does give us that virtuous cycle. In addition, it makes it easier for -- to plug in and add new datasets which do sometimes bring new contracts and new revenue along with those.

In addition, you asked about the expense side of this. As we redeploy resources from turning off and changing older platforms, it allows us to either have an expense save or in many cases it allows us to redeploy those the programmers and developers into areas where the highest growth opportunities like what we've talked about earlier it's something on ESG private markets, the areas that we're quite excited about with the merger with IHS Markit, how we're going to be able to bring energy transition products, further credit and risk products, etc. So, we can get some savings, but also look at how we're going to redeploy our development talent to the highest opportunities for the future growth got it.

Jeffrey Meuler -- Robert W. Baird -- Analyst

Okay, got it. Thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thank you. Thanks, Jeff.

Operator

Thank you for your question. Our next question is from Shlomo Rosenbaum with Stifel. Your line is open, sir.

Shlomo Rosenbaum -- Stifel -- Analyst

Hi, good morning. Thank you for taking my questions. Hey, Ewout, I apologize if I missed this, but the divested businesses are heard going to be $425 million in revenue, but what would the EBIT or EBITDA of those businesses be on a collective basis?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Shlomo, good morning. No, we haven't mentioned that specifically, but what Doug said during his prepared remarks is that the margins on these businesses are higher than the margins of the respective segments where these businesses are reported today. So, these are businesses with a bit higher margins than you see on average. However, if you think about it, the revenues of those four businesses is approximately 4% of the revenues of the pro forma combined company. So, therefore, the overall impact on the margins of the company is relatively modest. And then also take into consideration that the overall synergy numbers we have moved up with this announcement.

Shlomo Rosenbaum -- Stifel -- Analyst

So, if the synergies are moving up, so does that going to offset, in other words, how should I think of the offset? Should I think of it in terms of the share repurchase is going to be the primary offset or some of increased synergies, how are you guys thinking with that in terms of the lost EBIT?

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Yeah. The way to think about is maybe three elements. So, you could say the starting points for the combined company, the margins are slightly modestly lower based on these divestments. But then we will see two positives coming out of it, one, is higher synergy opportunity, which will help to drive the margins then further up in the future as well as the proceeds of these divestments will help with additional buyback capacity which is also, of course, a positive then for the EPS in order to offset the lost earnings.

Shlomo Rosenbaum -- Stifel -- Analyst

Okay, thank you. Few line of follow-up, just one thing I haven't heard before was kind of a termination fee on ETFs. Could you just elaborate on that a little bit more. Are they going to internal indices that they're creating on their own or what happen all of a sudden?

Douglas L. Peterson -- President and Chief Executive Officer

As you know in the Index business, occasionally, an organization will rebalance or maybe they might bring together some indices and switch to another party. And when we have a contract in place with an index provider that, sorry, an ETF provider that's using our index if they switch it could be that built in the contract. There is early cancellation fee. And that would be the case that we saw during this quarter.

Shlomo Rosenbaum -- Stifel -- Analyst

Okay, thank you.

Douglas L. Peterson -- President and Chief Executive Officer

Thank you.

Operator

Thank you for your question. We will now take our final question from Alex Kramm with UBS. Sir, you may ask your question.

Alex Kramm -- UBS -- Analyst

Yes. Hey, good morning, everyone. Just one quick follow-up on the upside to synergies. Can you, I know you've given a lot of color, but can you give a little bit more detail in terms of what you were able to look into now given that the deal is not closed and what is still prevented. I guess, what I'm asking, and I know I'm getting ahead of myself here. What further synergy opportunities may be out there that you haven't been able to tackle as, for example, you may look at the IHS Markit stand-alone cost base a little bit further once you own the company or other things that you already have in your mind that you just not willing to put numbers around yet? And I again, I know I'm getting ahead of myself a little bit. Thank you.

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Thanks, Alex. And really appreciate your joining the call today. I think you should see this in the following way. We do have, of course, certain restrictions legally with respect to how far we can look into certain details with respect to financials in terms of commercial agreements, in terms of procurement agreements, because the two companies are still run as stand-alone entities at this point in time. So, the way how you can solve partially is through so-called clean rooms, where are you have a separate segregated area where people can look into those particular details, but that can never be shared with any of the respective organizations.

So, definitely after we are able to complete the transaction, we have an opportunity to look even more deeper into all of that and further make those synergy numbers more robust compared to what we have now. But again, as I said before, we think that we have a very rigorous process in place. We have already had four submission rounds, bottom up substantiation of all of the synergies, we will have a fifth round before and the ultimate completion of the transaction, and then definitely, of course, we'll then learn more after we can start to operate as a combined company.

Alex Kramm -- UBS -- Analyst

All right. Well, thank you very much. That's it for me.

Douglas L. Peterson -- President and Chief Executive Officer

Great. Thank you, Alex. And I'm going to make some closing remarks. And first of all, I want to thank everyone for joining the call today. And as you saw, we had very strong performance in the third quarter. We delivered exceptional financial results with the 13% top line growth and adjusted diluted EPS of 24% growth. We launched new product platforms, we advanced our ESG propositions and many, many more things going on. And as we're able to talk about we're moving forward on the IHS Markit merger. This is something that we're very excited about. The path toward regulatory approval is getting clear. We now have to execute on the divestitures that we discussed today to achieve the full value, but also we don't want to rush. We want to have time to close and also to make sure that we can execute those transactions as well. As you know, we also have integration planning going on which is identifying synergies, but more importantly it's also identifying strategies for our businesses, how we're going to work together, how we're going to address the needs of our customers, how we're going to be bringing together technology and very importantly data, and then most importantly, our people and our culture and all of this work is going extremely well.

But today on this call, I also want to thank our people. They've been working now for 600 days. It sounds like a lot. 600 days people have been working from home and working remotely, starting to come back to the offices and when they do, I'd love to welcome them depending on which offices we're around the world. But our people have been dedicated. They've been working hard. They may be able to deliver the kinds of results that you saw earlier as well as work on this exciting transformation for the company with the merger. They've been diligent. They're helping rethink and reimagine the future of the work and I want to thank them for all of their dedication and commitment to making this company what it is and looking forward to the future for building an even better company. And then finally, I want to thank everyone on the call, the analysts for your questions and also the shareholders for your support and thank you very much. Looking forward to a great fourth quarter and the holidays at the end of the year. Thanks, everyone.

Operator

[Operator Closing Remarks]

Duration: 77 minutes

Call participants:

Chip Merritt -- Senior Vice President, Investor Relations

Douglas L. Peterson -- President and Chief Executive Officer

Ewout Steenbergen -- Executive Vice President, Chief Financial Officer

Manav Patnaik -- Barclays -- Analyst

Kevin McVeigh -- Credit Suisse -- Analyst

Andrew Nicholas -- William Blair -- Analyst

Hamzah Mazari -- Jefferies -- Analyst

Ashish Sabadra -- RBC Capital Markets -- Analyst

Jeffrey Silber -- BMO Capital Markets -- Analyst

Toni Kaplan -- Morgan Stanley -- Analyst

Craig Huber -- Huber Research Partners -- Analyst

Andrew Steinerman -- JP Morgan -- Analyst

George Tong -- Goldman Sachs -- Analyst

Owen Lau -- Oppenheimer -- Analyst

Jeffrey Meuler -- Robert W. Baird -- Analyst

Shlomo Rosenbaum -- Stifel -- Analyst

Alex Kramm -- UBS -- Analyst

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