TransUnion (TRU) Looks To Add A New Star To Its Portfolio With Deal To Acquire Neustar
12:02 pm Monday, September 13th, 2021
TransUnion (NYSE: TRU) is making a bit of a splash today by announcing a deal to acquire Neustar for $3.1 bln in cash from a private investment group. Most people know TransUnion as a credit score provider, but its business extends beyond that. This deal exemplifies TRU’s efforts to grow from its core credit business into a global information and insights company providing credit and non-credit services.
Neustar should fold in nicely with TRU’s other businesses. Neustar’s OneID platform will help to unify the digital identity capability TransUnion has built and acquired in recent years.
This deal is a play on trends toward digital commerce. TransUnion already has digital identity assets, but Neustar will add additional data and digital resolution capabilities to enable safer online experiences for consumers and businesses.
The financials look great at a first glance. Neustar is expected to generate $575 mln of revenue in 2021. That would provide a significant increase to TRU’s expected $3.1 bln of 2021 revenues.
TransUnion expects material revenue synergies through cross-selling opportunities as well as cost synergies. We love the healthy margins that Neustar brings. Neustar expects to generate $115 mln in adjusted EBITDA this year, or 20% of sales.
Neustar already has a broad customer base, which will open new markets and verticals for TransUnion while presenting significant cross-selling opportunities. Of note, Neustar’s security business is excluded from the transaction.
Overall, we like this addition for TransUnion. We see Neustar fitting in nicely with TRU’s strategy of diversifying beyond its core credit business. This is a large deal for TRU, which currently has a $23.3 bln market cap. The substantial size of the $3.1 bln acquisition could be making investors nervous, which may explain why the stock is a bit lower today.
However, we like the timing; TRU seems to be striking while the iron is hot. TRU noted on its last call that consumer spending has surged in the US, exceeding pre-COVID levels, and that consumers have substantial capacity to borrow. As such, most of TRU’s US businesses are on the upswing, particularly consumer lending, employment screening, collections, and healthcare. TRU also believes that recovery in its international markets has only just begun. Adding Neustar’s capabilities should add a nice boost just as consumer spending and employment are taking off.
