Morning, ladies and gentlemen. Thank you for standing by, and welcome to the FactSet Investor Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session I would now like to turn the conference over to your speaker host, Kendra Brown, Head of Investor Relations. Please go ahead.
Thank you, and good morning, everyone. Welcome to FactSet's conference call to discuss the proposed acquisition of CUSIP Global Services, which was announced on December 27th, 2021. We will be in various remote locations today and may have some audio quality issues. We appreciate your patience should we experience a disruption. Before we begin, I would like to point out that the slides we will reference during this presentation can be accessed via the webcast on the investor relations section of our website at factset.com. A replay of today's call will be available via phone and on our website. After our prepared remarks, we will open the call for Q&A. To be fair to everyone, please limit yourself to one question plus one follow-up.
Before we begin the discussion, I encourage all listeners to review the legal notice found on slide two and at the end of the press release issued on December 27th, 2021, which explains the risk of forward-looking statements and the use of non-GAAP financial measures. In particular, we are making forward-looking statements about the CUSIP Global Services acquisition and the related funding. This includes the expected timing for the completion of these transactions. There are various risks and uncertainties that may cause actual results to differ materially from those stated, projected, or implied by any forward-looking statements, including the failure of the S&P Global and IHS Markit merger to be consummated. Additionally, please refer to our forms 10-K and 10-Q for a discussion of risk factors that could cause actual results to differ materially from these forward-looking statements.
Joining me today are Phil Snow, Chief Executive Officer, Jonathan Reeve, Head of Content and Technology Solutions, and Linda Huber, Chief Financial Officer. With that, I will turn the discussion over to Phil Snow.
Thank you, Kendra, and good morning, everyone. Thanks for joining us today. I'm excited to discuss our definitive agreement to acquire CUSIP Global Services, the trusted originator and operator of market standard security identifiers, including CUSIP, CINS, and ISIN. To begin, I'd like to give you a brief overview of the transaction. As we announced last week, FactSet has entered into a definitive agreement to acquire CUSIP Global Services, otherwise known as CGS, from S&P Global for $1.925 billion, which we will fund through a combination of cash on hand and committed financing. We also expect to receive an estimated tax benefit of approximately $200 million on a present value basis in connection with this transaction. Linda will walk you through more detail on funding in a few minutes. This is FactSet's largest transaction to date.
It will be immediately accretive to our adjusted operating margins and is expected to be accretive to our adjusted diluted EPS within the first full year of ownership. As part of FactSet, CGS will continue to carefully steward the CUSIP system in close partnership with the American Bankers Association to ensure a seamless transition and continued innovation. The transaction, which is subject to customary closing conditions, including the completion of the anticipated S&P IHS Markit merger and other regulatory approval, is expected to close during the 1st calendar quarter of 2022. Upon closing, CGS will maintain the same autonomy that is in place today to fulfill its obligations and responsibilities under its agreement with the ABA. This includes keeping separate sales forces and solutions for FactSet and CGS.
Additionally, CGS's products will be exclusively managed by the CGS product team and will essentially continue to function as they do now. CGS will continue to maintain neutrality with their redistribution clients, including FactSet. Finally, FactSet's core products will continue to carry CGS identifiers. We look forward to welcoming the approximately 100 global professionals who are part of the CGS to the FactSet family. They will continue to be led by Scott Preiss and the current CGS management team and will be part of CTS. Jonathan Reeve, EVP and Head of CTS, has significant experience with the CGS business from his time at S&P Global. He previously held management responsibility for CGS and had the privilege of overseeing its activities with Scott Preiss reporting to him.
We anticipate that the strong working relationship and respect between Scott and Jonathan will be a significant asset towards successfully transitioning CGS to FactSet. Jonathan will walk through the opportunities we see for CGS as part of FactSet later in the presentation. Turning to the next slide, I wanna provide more detail about what CGS is, its services, and why we found it to be such an attractive asset. The ABA launched CUSIP in 1968. Since its inception, CGS has operated the CUSIP system on behalf of the ABA. For more than 50 years, CUSIP has been widely recognized as the gold standard identifier for securities. Today, CGS manages a database of 60 different data elements identifying more than 50 million global financial instruments. Its identifiers serve as the backbone, the security master files that are a critical part of front, middle, and back-office workflows.
In doing so, CGS provides mission-critical solutions across the capital market spectrum, including to many of our clients. It is a unique asset with tremendous market recognition and deep alliances with market participants across the financial service industry. CGS has extensive coverage of all types of financial instruments, with new entities being added all the time. A key area of anticipated growth is to continue to embed CUSIP into new and alternative asset classes. CGS's financial profile features robust margins and consistent revenue growth rates in the mid- to high-single digits. It generates approximately $175 million in annual revenue, most of which is from recurring subscriptions with a retention rate greater than 95%. As you can see from the graph on the right-hand side of the slide, CGS's operations are global, with a substantial majority located in the Americas.
They also have a diversified customer base that will complement and augment FactSet's very well. While this is a significant transaction for FactSet, our strategy remains unchanged. We remain focused on the three strategic pillars of our digital platform. Scaling up our content refinery to provide the most comprehensive and connected set of industry proprietary and third-party data for the financial markets. Enhancing the client experience by delivering hyper-personalized solutions so clients can discover meaningful insights faster. Lastly, driving next-generation workflow-specific solutions for investment professionals. CGS is a financial standard. Its ubiquitous nature aligns with our growth strategy and these strategic pillars. At FactSet, we strive to meet the information needs of our customers by providing the most comprehensive and connected information in the industry. Equally, CGS has a 50-year pedigree in helping the investment community understand and make actionable the ever-broadening investment landscape.
Together, FactSet and CGS can remain at the forefront of the investable universe and innovate as our industry explores new frontiers. Our content refinery is what differentiates us in the market. Today, FactSet collects about 25 proprietary core content sets. Around half of our employees are in the business of collecting content. Coupled with that, we have more than 800 third parties that provide data into our ecosystem. Finally, our clients trust us with their own data. Great example being the more than 4 million client portfolios on our systems. Our advantage is connecting that data and making sense of it for clients.
The velocity of data is moving more quickly, and our core competency is our ability to ingest structured and unstructured content, connect it to other data, and get it back to clients in a way that creates tangible efficiencies and helps them discover Alpha. This acquisition reflects our continued commitment to invest in our clients' content and workflow needs. CGS will significantly expand the breadth and reach of our robust suite of data management solutions, advancing our open data and off-platform strategy. CGS's position in the global securities market, coupled with the benefits it brings us, makes this a strategic investment that will enable us to be more competitive and a better, more critical business partner to our clients. I will now turn it over to Jonathan Reeve to walk you through how CGS fits into our strategy.
Thank you, Phil, and hello to everyone on the call. I had the pleasure of working with CUSIP first when I was at the Canadian Depository for Securities, and then while running product and content at S&P Global. For most of my career, I have counted on CUSIPs and ISINs to ensure proper data mapping and overall good data governance. I further learned to appreciate the importance of the CUSIP system, CGS's employees, and the relationship with the ABA when this business reported to me for five years, which is a head start that will undoubtedly accelerate the CGS transition to FactSet. CGS is a market leader in reference data strategy, and the plan is to continue to build on its incredible brand to advance FactSet's position in the reference data space. I am excited to welcome CGS to FactSet. CGS is a natural extension of FactSet's content refinery.
Their core competency in securities identification aligns well with our industry-leading data management capabilities, complementing our strength in symbology, concordance, and reference data management. CGS is an excellent fit given our substantial investments in reference data, our four decades of experience acquiring and integrating and managing content. This experience will ideally position us to address our clients' growing needs while enhancing the value we add to their essential workflows. As mentioned at the top of the presentation, CGS will function as a part of CTS. On a pro forma basis, the acquisition will increase CTS's annual subscription value, or ASV, to more than $425 million. This will scale CTS to be greater than 20% of FactSet's overall ASV.
Organically, CTS is our fastest-growing business unit, reflecting industry demand for our off-platform solutions and some of the most innovative workflow solutions in the market. The addition of CUSIP to the CTS product lineup will enhance the FactSet customer experience and accelerate our ability to innovate. CGS's capabilities, talents, and resources complement our own. It will further strengthen and diversify our superior service, enhancing our value proposition across both buy-side and sell-side markets. FactSet offerings such as DMS, our data management solutions, and RBICS, our Revere Business Industry Classification System product line, are complementary solutions for clients with CGS-related products, allowing us to further build our growth momentum, particularly in CTS. This combination will result in the opportunity to accelerate sales, driving greater ASV and related revenue growth for CTS.
We believe there are many areas that CGS can provide to supplement our services, including expanding beyond traditional security identifiers, actively driving innovation to accelerate initiatives in emerging growth areas, and focusing our reinvestment mindset on growing CGS's influence and reach. In addition, the reputational benefits from owning CGS represent a considerable opportunity to grow our broader data management offerings, raise prospect awareness, and enhance our brand and highly desirable markets, including security issuance, settlement, back office, and trading. With that, I will turn the call over to Linda.
Thanks, Jonathan. It's been an exciting 12 weeks for me at FactSet. I join Jonathan and Phil in our excitement to welcome the CGS team as future colleagues. FactSet is an excellent company with outstanding performance and a strong culture, and it's a great time to join. Turning to our capital structure, this acquisition aligns with our longer-term optimization of FactSet's balance sheet. Funding will consist of $2 billion in initial committed transaction financing from PNC Bank and Bank of America, the primary banks in our existing credit facility, as you can see in column number 1 on the slide. Additionally, as you can see on column number two, we are considering a potential $1 billion bond issuance to replace some of the initial bank financing. Timing on this issuance will be subject to regulatory approvals.
On slide 13, as I just mentioned, to fund the CGS acquisition, FactSet secured $2 billion in committed financing from PNC Bank and Bank of America. The financing facility consists of a $1 billion three-year term loan A and $1 billion 18-month term loan A. Also, in connection with the financing, we will replace and resize our existing five-year $750 million revolving credit facility with a new $500 million five-year revolving credit facility with a $750 million additional accordion feature. Following the acquisition closing, we intend to suspend our share repurchase program for the remainder of our fiscal 2022, which to remind you, ends on August 31st. That excludes potential minor share repurchases to offset the dilution impact from stock option grants. Turning now to slide 14.
As for our longer-term capital allocation plan, we intend to pursue credit ratings in conjunction with our potential $1 billion bond issuance. The proceeds of this issue will be used to replace the $1 billion 18-month term loan, as you can see at item number two. We filed a shelf registration statement yesterday and intend to hold rating agency meetings this month. Once we've completed the CGS acquisition and related financing, we intend to prioritize free cash flow for the repayment of debt to reduce our net leverage. We do not anticipate that there will be any change to our dividend policy. On slide 15, our capital allocation priorities will continue to be balanced and focused on investing in our business, creating value for shareholders, ensuring financial flexibility, and mitigating risk. This represents our current view of our capital allocation philosophy.
1st, our businesses have a strong, proven track record that require reinvestment to ensure that we have the best products for our clients. 2nd, regarding share repurchases, as we stated before, we will temporarily cease share repurchase activities with the exclusion of potential minor share repurchases to offset the dilution impact from stock option grants. 3rd, we are a growth company with a healthy dividend, and we will continue to return value to our shareholders through our dividends. Finally, we will continue to look at acquisitions. FactSet has prudently managed its capital structure with significant capacity to expand our balance sheet when opportunities arise. This acquisition will not limit us from being an active participant in the M&A part of our industry and from pursuing attractive opportunities if and when they are appropriate.
Now, I'll turn the call back over to Phil for final remarks before opening the line for Q&A.
Thanks, Linda. In summary, the acquisition of CGS aligns well with our strategy to invest in content and technology, capitalize on market trends, and address client needs. As part of CTS, we have the leadership and vision to further CGS's market position and drive long-term value. CGS is an industry-recognized resource with a path to future growth via additional asset classes and other expansion opportunities within FactSet. Additionally, naturally combining trusted identifiers with FactSet's neutral ecosystem will accelerate our open data strategy and provide avenues for additional growth opportunities.
It will also enhance FactSet's financial profile with an underlying growth rate in line with FactSet and an accretive margin and adjusted diluted earnings in the first full year of ownership, as well as expand FactSet's CTS to more than $425 million of ASV. Finally, the acquisition is a catalyst for FactSet to consider our inaugural bond offering and pursue a credit rating aligned with longer-term capital structure optimization. That concludes our prepared remarks. We will now open the line for questions and answers. Operator?
Thank you, ladies and gentlemen. Our 1st question coming from the line of Manav Patnaik with Barclays. Your line is open.
Thank you, good morning, and congratulations. I just had one, my 1st question is just on the numbers, Linda, if you could help maybe. You know, the $175 million in annual revenue, should that be considered a similar number for ASV? And also, you know, you said robust margins and accretive. Can you just help us with what that number might look like?
Sure, Manav. $175 million in revenue, we will need to think a little bit further about whether that how that equates with ASV. We just started the process with this acquisition late in October, so we've moved very fast to get to where we are today. Perhaps Phil or Jonathan might be able to comment further on that. We are not speaking specifically to the margins in the CGS business other than to say that they're very healthy, and this is a standards business. We will bring this business on board subject to a one-year services agreement with S&P. We think that after we do that and bring it on board here at FactSet, the margins will look similar to what the margins look like in other standards businesses. Hope that's helpful.
Yeah, that's helpful. Just to clarify, you know, I think I get the CUSIP identification part, you know, the attractiveness of that. I'm just trying to understand, you know, in terms of the actual data, you mentioned reference data, like just trying to appreciate the proprietariness of the content in there.
Sure. Perhaps Phil or J.R.
Yeah, JR, do you wanna take that one?
Yeah. I can take that one. As a part of the numbering process, other useful data items are collected. There's around up to 60 data items that are collected in the creation of those numbers. For example, if you're providing a CUSIP on a bond, you'd start to collect the coupon and the maturity date and whether it had any features, and so on and so forth. Those additional features, or you might call them terms and conditions, while the security identifier is being created, provide additional value to CGS's customer base.
All right. Got it. Thank you.
Now, next question coming from the line of Toni Kaplan with Morgan Stanley. Your line is open.
Thank you. Just from a product perspective, just so I understand, are there any alternatives for CUSIPs or really everyone has to get the CUSIPs from formerly S&P, but now will be you guys? Just trying to understand that from the point of view of, it seems like there shouldn't be any lost revenue from a transition, but, you know, is there any incremental revenue as well? Obviously, you talked about selling additional data and expanding relationships. Just on the actual CUSIPs part, it seems like everyone who's trading in these securities has to have this data.
Yeah, CUSIP
Oh, go ahead, J.R. Yeah, please.
Sorry. Yeah, CUSIP. CUSIP is the national numbering agency for the US, and as such, any equity trading on an exchange or bond issuance out of the US requires a CUSIP number. That won't change in the transition from S&P to us. Equally, you know, as the universe of investable securities expands, there are other useful uses for these identifiers. In fact, you know, the breadth of CUSIP coverage now, you know, spans 30 or 40 asset classes beyond what you might traditionally think of as an equity listing or fixed income. It's that expansion of the investable community that is obviously, you know, what we'd be looking for towards the future. From a transition perspective, everything should remain stable.
Great. Wanted to ask about the 15% of revenue that's not subscription-based. Is it based on volumes of trades in different securities markets? Or how should we think about just the usage-based component or volume-based component of the model?
Right. I'm happy to take that one as well. The 15% is the revenue that's derived upon the CUSIP application. When an issuer needs a CUSIP for either bond equity or security type, you know, they need to submit paperwork so that identifier can be created. Those to some extent are one time base fees, and they're obviously driven by issuance in the market. The other 85% is the subscription part of the business. That's really the issuance fees when people are applying or firms are applying for a CUSIP number.
Terrific. Thank you.
You're welcome.
Now, our next question coming from the line of Ashish Sabadra with RBC Capital Markets. Your line is open.
Congrats on the deal as well. Phil and JR, thanks for providing a lot of color around the cross-sell opportunities. I was wondering, as you think about these opportunities, how should we think about the revenue growth for CGS from the current mid- to high-single-digit? How should we think about it over the mid-term? Also if it's possible to quantify the revenue synergies also on the FactSet side by ability to sell FactSet into the CGS customer base.
Hey, Ashish, it's Phil. JR, feel free to add on. You know, we view this deal as additive, you know, from a revenue standpoint. As we mentioned in the script, right, the growth profile of the company is very similar to what FactSet has been doing over the last few years. But we do see a lot of opportunity to extend, you know, our DMS capabilities, which is a very fast-growing piece of the CGS business, get into more types of user workflows within our existing clients. There are going to be, you know, other types of firms that use CUSIP that FactSet might have, you know, very little experience or penetration with today that open up further opportunities.
It's hard to comment on, you know, sort of, like, the exact revenue synergies, but we do feel like there's tremendous opportunity across a number of different vectors to, you know, to take this great franchise, which is healthy by itself, and add more capabilities to it and, of course, continue to invest in new areas.
That's very helpful color. Thanks, Phil. Maybe Linda, if I can ask a question on the earnings accretion. The acquisition is expected to be accretive in the first year itself. As we think here about out years, particularly calendar year 2023, I was wondering if you could provide any color on how should we think about the accretion there. We were estimating close to a mid-single digit earnings accretion. Wondering if we are in the right ballpark there. Any color will be helpful. Thanks.
Ashish, I think we're gonna stick to 2022 and make sure that we have that right before we comment on 2023. I think part of this will depend on the synergies we're able to realize as we move forward on this. It's very attractive in terms of the financials for FactSet, given the immediate accretion and the very healthy margins of the acquired business. We're optimistic, but we'd rather not get into what 2023 accretion would look like at this point. Thanks.
No worries. Thanks, Linda, for that color. Congrats once again.
Thank you.
Now our next question coming from the line of Alex Kramm with UBS. Your line is open.
Yes. Hey. Hello, everyone. Given that this is a little bit of a, I guess, utility type business, just wondering what type of pricing power this company has had in the past or if there's not much to do on the pricing side. Maybe how much pricing has been a contributor to that mid to high single digit growth.
Sure. I'll take a shot at this, Alex, and then let JR and Phil add to it as necessary. I think it would be fair to say that the CUSIP business has been managed in a way that is conservative, and pricing has changed modestly over time. I think we have a lot to learn about what can be done with pricing in this business. But given that it is a utility, as you note, I think we need to learn a little bit more before we make decisions about what we're going to do on pricing. However, as a standards business, Alex, as you point out, it does have the ability to take pricing in a value-driven way.
I think we might need to learn a little bit more before we see what we can do with it. I'll ask JR to comment further, and Phil may want to as well.
No, I think you essentially covered it. You know, it's a valuable industry capability. Until we learn a little more, it's probably. I think Linda's answer covered it.
All right, fair enough. Linda, as well for you, maybe talk a little bit more about leverage going forward. If my number, my math is right, I think you're gonna be sitting around, I think, a little over 3x gross and I think, mid-twos on a net basis. Clearly, you just said you wanna, you know, pay down debt to be ready for other things. How do you think about leverage, A, on a net or growth basis, where FactSet should be, and then where it could go for any additional kind a opportunities in the marketplace?
Sure, Alex, thanks for the question. As we had talked about, it's an exciting time to be able to look to optimize FactSet's balance sheet. As part of this, we're doing, you know, quite a few things. We're looking to refinance and change up the nature of our revolver. We're looking to potentially do our first bond issuance with ratings. We're looking to think about our long-term capital structure. We're gonna be in an unusual situation as we deal with the initial leverage from this deal. As we said, free cash flow will be very much primarily committed to paying down the debt levels. In terms of how the ratings play out, that's completely up to the rating agencies, so we'll see what we get back.
In terms of longer-term leverage levels, I think that we would expect that this company will be an investment-grade company somewhere around the Baa BBB level. We'll refine that as we move forward. But we're gonna move through this initial period of looking to deal with the debt from this transaction, move forward from there. Hope that's helpful enough.
No number for us to think when you can go back and buy back stock, I guess, is still to be determined?
Yes, still to be determined. Let me give you this number, which is helpful. We estimate our free cash flow at about $400 million. So you can look at some of the math there. However, as we said, we're just beginning our conversations with the rating agencies, and we don't wanna get ahead of that discussion.
Fair enough. Thanks again.
Thanks.
Our next question coming from the line of Kevin McVeigh with Credit Suisse. Your line is open.
Great. Thanks so much, and congratulations. Hey, is there any way to think about you know, beyond CTS, how this can impact the core research and analytics business? I think I said another way, if the core run rate of the business is $175 million, is there any way to think about what it can be as you scale it across the existing platform? I know that's a little theoretical, but is there a range to think about, you know, as the business starts to kind of ease in and become more scalable than FactSet, what the potential revenue run rate for the business can look like?
J.R., you wanna take that one?
Yeah. You know, we're talking about first of all, thank you for the question, Kevin. We talked about-
Sure.
The benefits to CTS and specifically to our Data Management Solutions. It's important to note that infrastructure that drives CTS is the same infrastructure that drives you know our workstation and analytics business. In other words, when we build out content or coverage you know generally we try to do that in a symmetrical way and create parity so that whether people wanna consume FactSet content in a desktop or in a data feed or an API or in the cloud, they can get that content in either format.
You know, in other words of saying that, as we build out coverage or as we provide coverage to new and evolving asset classes, you know, you should expect that kind of coverage to appear both in CTS products and our desktop products. You're absolutely right. There'll be benefit there from a coverage perspective, although we're sort of highlighting CTS here because that's where CUSIP's gonna sit. The build-out of content is really across all platforms.
That's very helpful. This may be more of a basic question, but the dynamic with the ABA, can you just help us understand that? At some point, is there some expense synergy there? Does that change over time? I mean, it sounds like it's a relationship that dates back to the late sixties. Just the dynamic with the ABA and how that kind of if that gets impacted at all as it kind of transitions from S&P to FactSet.
Yeah. The ABA is really the, you know, the owner of the CUSIP brand, right? S&P was the operator, and now FactSet will be the operator. In terms of a relationship, it's a very close partnership, working relationship. I can tell you from my time at S&P, I would, you know, go down to D.C. and meet with them to provide, you know, business and product updates. They do very much wanna be involved, and our intention is to, you know, manage that relationship in absolutely the same way to, you know, work with them both on updating them with respect to how business is going, but also on new product concepts. They're very much involved, and the plan is to maintain that relationship much like S&P did.
Thank you.
You're welcome.
Our next question coming from the line of Andrew Nicholas with William Blair. Your line is open.
Hi. Good morning, thanks for taking my questions. My first one, just a point of clarification. It sounds like CGS gives you some operational capabilities. There's certainly some revenue, cross-sell opportunities as well. Is there any benefit to owning the CGS data specifically? Does that provide you any opportunities that weren't available to you as a licenser of that data or a subscriber to that data feed? If so, are there any examples that you could provide on that front?
You know, in terms of CGS's product portfolio, right? We as FactSet consume CGS products, and so do many other investment banks or other data vendors. In terms of access to products, no, we are another consumer of CGS's products just like anyone else. There's no unique ability to have access to that. CGS needs to treat FactSet just like any other data vendor, and that happened at S&P, and that will continue to happen while, you know, at FactSet. Obviously being part of the same company and presumably in the same virtual room, you know, there's an opportunity to collaborate and talk and think about where the industry is going, whether that's new asset classes and the like. In terms of product access, that has to sort of stay neutral and be provided similarly across, you know, all data vendors.
Understood. Thank you. For my follow-up, you talked a little bit about price as a driver of the growth algorithm. Is there any other way to describe kind of the rest of it or kind of segment it off? Is the vast majority of the additional growth from new products and asset classes which you hope to kind of keep expanding? Or are there other pieces to this growth algorithm that come above that? Thank you.
Yeah. I think, you know, there's definitely other ways. CUSIP is continuously thinking about how to add coverage in terms of asset classes or even the fields that go along with that CUSIP identifier. For example, the CUSIP business is starting to add flags around green bonds. Which bonds have been flagged as green and therefore meet some sort of ESG criteria. That would be available as a product from CUSIP to the industry. Equally, as you folks know from being on these calls, and after acquiring Truvalue Labs, FactSet has a very robust ESG program.
Our ability to, you know, create new and interesting products leveraging the, you know, potentially the green bond information, just as an example from CUSIP, along with our own FactSet ESG strategy, are just some of the product ideas. You can sort of go on and on across the various content initiatives that FactSet has running at this time from deep sector to private markets. I don't want to get too deep into product innovation, but we're sort of excited to think about what all the possibilities could be.
Thank you.
Thanks, Andrew.
Our next question coming from the line of Shlomo Rosenbaum with Stifel. Your line is open.
Hi. Good morning. Thank you for taking my questions. This first one I think is probably for J.R. as well. I just want to piggyback off of the last question. I'm trying to understand some specifics about how you could accelerate the growth of CUSIP, kind of a practical on-the-ground extension of the business being part of FactSet versus where it was with S&P beforehand. You know, if you have to run the business pretty separate and treat FactSet as really a customer, separate sales force, I guess product development, like how do you accelerate the growth versus what they had before. How do you innovate more than you could have just with licenses? It's just not clear to me. If you can kind of expand on that and maybe give just a real-life example, one thing that doesn't kind of give away too many secrets.
Yeah, you know, I think the ability to innovate and, you know, bring new product to market is of interest. There are areas and partnerships that CGS has worked on in the past, where we can accelerate. I gave you one example around ESG bonds, and I mentioned other initiatives. I think, you know, what FactSet is very interested in understanding is what are the product ideas that the CGS group has on hand, and which ones of those do we think have legs?
Because of the FactSet strategy and how we are investing, especially in content, you know, we can choose from those CGS ideas and figure out which ones are the ones we wanna, you know, add some fuel to the fire and invest on. It's definitely too early to pick of the number of things that are on the CGS roadmap. It's too early to pick which ones of those we'd pursue. There's you know, definitely ideas afoot, and obviously we'd have to wait till they're part of the team in order to start to analyze those.
Okay. As a follow-up, I'm trying to understand, maybe Linda, you can help me with this, making the bridge to $425 million of ASV. I think we ended the year at, like, $218 million for CTS, one quarter in, you know, you don't break it out quarterly, but you're adding about. Let's assume all the revenue goes into ASV. You're at $175 million. You have another $32 million that the CTS ASV is gonna have gone up. If I just take the change between the fourth quarter ASV and the first quarter ASV, you're only up, like, $18 million. I'm trying to kind of bridge this all. I'm trying to understand, did ASV go down dramatically in one of the other units or, you know, what am I missing in kind of trying to understand what's going on with ASV?
I can take that one.
Sure. Thank you.
Shlomo, at the end of Q4, when we refactored the business lines into three, there was a piece of the digital solutions group that used to be part of Wealth that ended up coming into the CTS business. I believe if you go to one of the final slides in the Q4 presentation, we did that math for everybody. I think the number exiting last year was closer to 280. It might have been 278 or 279 in that presentation, which meant that we brought about 60 or so over from the Wealth group. That help?
Okay. I'll go back over that then. Thank you.
Sure. Yep.
Our next question coming from the line of Craig Huber with Huber Research. Your line is open.
Great. Thank you. Maybe I missed this, but, are there any material cost synergies you want to highlight here?
Craig, we think it's a little early to go into that. I think it's important to note that the purchase price is $1.925 billion. As we said, we expect approximately a $200 million tax benefit from this transaction given the way it's going to be brought into FactSet. We feel that we've acquired a mid-to-high single digits grower with very healthy margins. If you do that math, Craig, we view that we've paid sort of in the multiple in the high teens for this business, which is a very attractive level given where deals in the sector are going. But synergies, we have to hold these two businesses separate until the S&P IHS Markit deal closes.
Kind of hard to get too deeply under the covers and make commitments on synergies right now. Let us come back to you on that as we go into the next quarter's earnings call and as we do our investor day in April.
Just a bookkeeping question. The $175 million of revenue you talk about here, I mean, FactSet licenses this data, correct? So, I mean, that's got to be a piece of the revenues of the CUSIP underneath S&P. Is it almost immaterial, though? Or ask differently, is the 175 sort of a net incremental number for you guys?
I think most of it is net incremental. Phil or JR may have a sense of, you know, what the net would be. I don't think there's all that much difference, but maybe JR or Phil-
Well, yeah, happy to address that. It's sort of and it sort of doesn't really matter, right? Because from a business perspective, they need to be kept separate. FactSet's obligations as it relates to its dues for using CUSIP in its products will remain unchanged. That relationship, you know, that relationship exists with S&P and would exist here at FactSet too.
My last question, if I could just ask, you talked about other asset classes that CUSIP has moved into and may move into other ones in the future. What are some of the main ones you're talking about there outside of fixed income and equities? Thank you.
Yeah. I mean, they offer numbers on all sorts of derivatives. You know, they also, for example, have created CUSIP numbers for precious metals and sort of any structured instrument that's out there and loans and that sort of thing. So as I'm sure all of you know, the world of investable securities is expanding sort of on a regular basis. As that universe of investable securities expands, people need security and making sure, you know, as they identify those securities for their systems or they're trading with another partner, that they're actually talking about the same entity. As that universe of investable securities, then so does the options for having a, you know, a CGS-based number. That's where I think, you know, some of the future lies.
Great. Thank you.
Craig, also, just in terms of equities, you know, the types of instruments within both equity and fixed income also continue to expand. You might want to think about SPACs, special purpose acquisition companies, which have been very popular and have sort of mushroomed in terms of usage in the last year or so.
Thanks a lot.
Our next question coming from the line of Keith Housum with Northcoast Research. Your line is open.
Good morning, everybody, and thanks for taking my question. I just want to unpack the relationship with ABA a little bit more. You know, I just want to get confirmation that there's no risk that this business goes elsewhere. I mean, as ABA is the owner of the CUSIP brand, what's the, I guess, is there a long-term relationship or long-term contract that FactSet will now have after the acquisition that there's no risk this business goes elsewhere?
Let me start on that.
Yeah, that's.
Oh, I was just gonna say.
Yeah, go ahead. Go ahead, Linda.
I'm sorry. Just gonna say, yes, there is a long-term contract here, and that's part of the acquisition. Phil can speak a little bit more about it.
I just again just building on the previous comments here, Keith. We don't anticipate that anything is gonna change there. We expect to have you know a very fruitful and long-term relationship with the ABA the same way that S&P did. We're very excited to partner with them. But it's difficult to disclose too many of the terms of that agreement. It wouldn't be appropriate.
Okay. That's really the only question I had. Everything else was asked. Thank you very much.
Thank you.
Any other follow-up questions?
Okay. Well, thank you all for joining us today. In closing, I want to reiterate how excited we are to welcome CGS to FactSet. This is a natural extension of FactSet's strategy as a neutral open ecosystem, and we look forward to working collaboratively with the ABA to enhance the CUSIP standard further and ensure a seamless transition of CGS. I wish everyone a happy New Year, and if you have additional questions, please reach out to Kendra Brown. Operator, that ends today's call.
Thank you. Ladies and gentlemen, that does conclude our conference call today. Thank you for your participation. You may now disconnect.