McGraw Hill Financial Inc (NYSE:MHFI), that owns Standard & Poor’s rating agency plans to hike its stake in CRISIL Ltd. (NSE:CRISIL) to 75 percent through an open offer.
McGraw Hill Financial Holdings (Singapore) P Ltd has made a voluntary offer to acquire 15.67 million shares or 22.23 percent of the voting shares of India’s leading rating agency, CRISIL Ltd. (NSE:CRISIL) at a price of Rs 1,210 or $12.42 per equity share.
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The offer represents a premium of 29 percent to Friday’s closing price and a 12 percent premium to CRISIL Ltd. (NSE:CRISIL)’s all-time closing price on the National Stock Exchange.
McGraw Hill Offer Acceptance Affects
If McGraw Hill Financial Inc (NYSE:MHFI) manages to get full acceptance of its offer, it would help the owner of iconic brand, Standard & Poor’s Ratings, to enhance its stake in CRISIL Ltd. (NSE:CRISIL) to 75 percent from the current 52.77 percent.
The total transaction value is estimated at $340 million at the prevailing exchange rates, if the offer gets accepted by the shareholders in full. The offer would be funded through McGraw Hill’s existing cash resources.
According to current regulations in India, the parent of listed Indian company can own a maximum of 75 percent stake in the unit. The local securities market regulator Securities Exchange Board of India mandates minimum 25 percent shareholding by public. Recently several companies in India have adopted offer-for-sale route to reduce their holdings beyond 75 percent to comply with June 2013 deadline.
Harold McGraw III, Chairman, President and CEO of McGraw Hill Financial Inc (NYSE:MHFI) expressed his company’s intention to keep CRISIL Ltd. (NSE:CRISIL) a listed public, independent company to maintain the company’s leadership and essential role across the Indian economy.
Standard & Poor’s Ratings Services is a business unit of McGraw Hill Financial Inc (NYSE:MHFI). CRISIL Ltd. (NSE:CRISIL) and S&P Ratings Services have affiliation since 1996. Their relationship got cemented further in 1997 with McGraw Hill acquiring stake in the Indian rating agency. In 2005, McGraw Hill became the Indian rating agency’s majority shareholder.
CRISIL Ltd. (NSE:CRISIL) has been posting revenue at compound annual growth of 19.3 percent during the past five years. Interestingly, its revenue of INR 9,777 million or $173.1 million has 63 percent share derived from business generated outside India.
Morgan Stanley India Private Ltd is the Manager to the offer, which is expected to open during July and close in early August 2013.
The transaction would be immediately accretive to McGraw Hill Financial Inc (NYSE:MHFI)’s earnings per share.