STAMFORD, Conn. & ARLINGTON, Va.--(BUSINESS WIRE)--Gartner, Inc. (NYSE:IT), the world's leading information technology research and advisory company, and CEB Inc. (NYSE:CEB), the industry leader in providing best practice and talent management insights, today announced that they have entered into a definitive agreement whereby Gartner will acquire all of the outstanding shares of CEB in a cash and stock transaction valued at approximately $2.6 billion. The transaction has a total enterprise value of approximately $3.3 billion, including Gartner’s assumption of approximately $0.7 billion in CEB net debt. The transaction is immediately accretive to Gartner’s adjusted EPS and is expected to be double-digit percentage accretive in 2018. The transaction has been unanimously approved by the Boards of Directors of both companies and is expected to close in the first half of 2017.

Under the terms of the agreement, CEB shareholders will receive $54.00 in cash and 0.2284 shares of Gartner common stock for each share of CEB common stock they own, implying 70% cash and 30% stock consideration for the offer. The total $77.25 per share consideration represents a premium of approximately 31% compared to the volume weighted average closing stock price of CEB over the past 30 days, approximately 41% compared to the volume weighted average closing stock price of CEB over the past 60 days, and approximately 25% compared to CEB’s closing stock price on January 4, 2017, the last trading day prior to today’s announcement. Upon completion of the transaction, Gartner shareholders will own approximately 91% of the combined company and CEB shareholders will own approximately 9%. In addition to issuing Gartner shares, the transaction will be funded through a combination of Gartner cash, capacity under its existing credit facility and new additional debt financing.

The addition of CEB further enhances Gartner’s ability to deliver tremendous value to its clients and help them make the right decisions with confidence. Gartner’s analyst-driven, syndicated research and advisory services in Information Technology (IT), Marketing and Supply Chain, combined with CEB’s best practice and talent management insights across a range of business functions, including Human Resources (HR), Sales, Finance and Legal, will provide a comprehensive and differentiated suite of advisory services aligned to the mission-critical priorities of virtually all functional business leaders across every industry and size of enterprise worldwide.

On a pro forma basis, the combined company’s reported results for the last 12 months ended September 30, 2016 include approximately $3.3 billion in revenue, $693 million in adjusted earnings before interest, taxes depreciation and amortization (EBITDA), and $463 million in free cash flow. Together, Gartner and CEB will employ more than 13,000 associates serving clients in more than 100 countries worldwide.

“We are excited about joining forces with CEB, a world-class company we have long admired. Our highly complementary business models will create the leading global research and advisory company for all major functions in the enterprise,” said Gene Hall, chief executive officer of Gartner. “We look forward to working with CEB’s highly talented teams to leverage our global reach and apply Gartner’s proven operational and sales execution capabilities at scale to accelerate growth across CEB’s businesses. We will also introduce Gartner’s existing syndicated research and advisory services to CEB’s clients in a broad range of functional areas that extend beyond our existing IT, Marketing and Supply Chain roles. Similarly, we will introduce CEB’s best practice and talent management insights to Gartner clients worldwide.”

“We expect this acquisition to create value for our shareholders in both the near and long-term, including immediate accretion on an adjusted EPS basis,” added Mr. Hall. “Associates will benefit from expanded career opportunities as part of a larger, strong organization with the most extensive client offering in the industry. We remain focused on delivering tremendous value to our clients, capturing our vast market opportunity and continuing our trend of driving consistent double-digit growth in revenue, earnings and free cash flow.”

Tom Monahan, chairman and chief executive officer of CEB, said, “We have long admired Gartner for its impact on clients and track record of growth. We’re pleased to reach this agreement, which offers compelling benefits to CEB shareholders, clients and employees. CEB shareholders will receive substantial and immediate value for their investment while benefitting from the upside and strong growth prospects of the combined company. The combined company will have unmatched insight into technology, talent and the other drivers of corporate performance. It will also have deep reach into a massive, immediately addressable market with clear need for our support across a range of functional areas. CEB employees will benefit from being part of a diversified and growing global organization with enhanced opportunities for career growth and development. We look forward to working with the Gartner team to accelerate our growth and scale our impact on members and clients.”

Mr. Hall concluded, “Gartner and CEB are well-aligned from a culture, talent and business model perspective, which will support a seamless integration following close. We look forward to welcoming CEB to our team as we work to realize the benefits of this compelling combination for all our clients, shareholders and associates around the world.”

Benefits of the Transaction

• Accelerates CEB’s Growth by Leveraging Gartner’s Proven Practices and Global Scale. Gartner will accelerate CEB’s revenue growth by applying its proven practices operating at scale, which have driven Gartner’s sustained double-digit growth. CEB will also benefit from Gartner’s broader market presence and global footprint. As a result, Gartner expects to deliver double-digit contract value growth for CEB by the third full year after closing.
• A Highly Complementary Combination with Enhanced Capabilities. Gartner will expand CEB’s existing best practice and talent management insights for executives in large enterprises into the mid-size enterprise segment, where Gartner has more extensive market presence. In addition, Gartner will introduce and develop a comprehensive suite of new syndicated research and advisory products leveraging CEB’s existing strength in Human Resources, Sales, Finance and Legal. CEB’s large enterprise clients will benefit from Gartner’s expertise in technology as decision-making is increasingly taking place across a wider range of functional roles beyond IT.
• Attractive and Aligned Business Model Fundamentals. The combination will benefit from a complementary, expanded and growing base of recurring, subscription-based revenue streams offering high visibility and high renewal rates. In addition, both companies are expected to continue generating strong cash flow conversion given the negative working capital dynamics associated with upfront invoicing.
• Delivers Attractive Short and Long-Term Financial Benefits. The transaction is expected to be immediately accretive to Gartner’s adjusted EPS before cost synergies, with double-digit percentage accretion in 2018. In addition, Gartner expects to realize annualized cost synergies of approximately $25 million - $50 million starting in 2018, which will further enhance the financial benefits of the transaction for shareholders. Over the longer-term, Gartner expects to deliver double-digit revenue, earnings and free cash flow growth while maintaining a strong balance sheet and liquidity profile. Given the expected strong cash flow generation of the combined business, Gartner plans to quickly de-lever to approximately 3 times gross leverage within 24 to 36 months after closing.
• Significantly Expands Market Opportunity to Enhance Long-Term Growth. Gartner’s existing vast market opportunity in IT, Marketing and Supply Chain, combined with CEB’s massive market opportunity in Human Resources, Sales, Finance and Legal, significantly increases the overall addressable opportunity for the combined company.

Approvals, Financing and Close

The transaction, which is expected to be completed in the first half of 2017, is subject to the approval of CEB shareholders and the satisfaction of customary closing conditions, including applicable regulatory approvals. Under the terms of the definitive agreement, CEB has a go-shop right to solicit third party alternative acquisition proposals for the next 35 days.

As part of the transaction, Gartner will issue approximately 8 million shares of Gartner common stock. Gartner intends to fund the cash portion of the transaction consideration through a combination of cash on hand and fully committed debt financing to be provided by JPMorgan Chase Bank, N.A. and Goldman Sachs Bank USA. Upon completion of the transaction, Gartner is expected to have net debt of approximately $3 billion.

Advisors

Evercore and Goldman, Sachs & Co. are serving as financial advisors to Gartner, and Wilson Sonsini Goodrich & Rosati is serving as legal counsel. Centerview Partners LLC acted as lead financial advisor to CEB and Allen & Company LLC also acted as financial advisor. Kirkland & Ellis LLP is serving as legal counsel.

About Gartner

Gartner, Inc. (NYSE: IT) is the world’s leading information technology research and advisory company. We deliver the technology-related insight necessary for our clients to make the right decisions, every day. From CIOs and senior information technology (IT) leaders in corporations and government agencies, to business leaders in high-tech and telecom enterprises and professional services firms, to supply chain professionals, digital marketing professionals and technology investors, we are the valuable partner to clients in more than 10,000 distinct enterprises. We work with clients to research, analyze and interpret the business of IT within the context of their individual roles. Gartner is headquartered in Stamford, Connecticut, U.S.A., and has almost 9,000 associates, including 1,900 research analysts and consultants, operating in more than 90 countries. For more information, visit www.gartner.com.

About CEB

CEB is a best practice insight and technology company. In partnership with leading organizations around the globe, we develop innovative solutions to drive corporate performance. CEB equips leaders at more than 10,000 companies with the intelligence to effectively manage talent, customers, and operations. CEB is a trusted partner to nearly 90% of the Fortune 500 and FTSE 100, 80% of the JSE, and more than 70% of the Dow Jones Asian Titans. More at www.cebglobal.com/.