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S&P Global CEO: Rival's deal shows fintech competition getting 'tougher'

A recent blockbuster deal involving one of S&P Global Inc.'s chief competitors underscores how competitive the financial technology space is, according to President and CEO Douglas Peterson.

Investors led by Blackstone Group LP in late January agreed to buy a majority share of Thomson Reuters Corp.'s financial and risk business. Per terms of the deal, the partnership led by Blackstone will acquire a 55% stake in a new entity that will hold the Thomson Reuters segment. The soon-to-be former parent will own the rest of the new company, which is valued at about $20 billion.

Speaking on a fourth-quarter 2017 earnings conference call, Peterson said the transaction will not change S&P Global's approach to its own business, but shows that the financial technology industry is getting "tougher all the time."

"We think the Thomson Reuters transaction is going to make the markets more competitive, but we welcome that competition," he said, adding that his company is focused on investing and improving a number of its businesses.

CFO Ewout Steenbergen noted that the company has previously said it would consider growing its ratings presence in emerging markets, bolstering its indexes in fixed income, ESG, international and smart beta, and strengthening its risk analytics offerings within its market intelligence segment.

S&P Global will have some extra cash to play with thanks to recently enacted federal tax reform to pursue those projects. While it took a $149 million charge in the fourth quarter of 2017 due to repatriation, S&P Global expects its new tax rate to result in about $200 million in additional free cash flow for 2018.

Speaking more broadly, Peterson said the company expects global economic growth to be stronger in 2018 than it was the previous year. Low unemployment in the U.S. is contributing to that growth, and the tax cuts should accelerate consumer spending, he said. While tax reform could have a negative impact on issuance this year, Peterson stressed that the new law was "very positive" for the economy overall. He also said there is a "very robust pipeline" of maturities ahead, especially in 2019 and beyond.