McGraw Hill Financial Inc is making a voluntary open offer to acquire up to 22.23 per cent additional stake in credit rating agency CRISIL Ltd. If fully successful, McGraw Hill Financial will increase its holding in CRISIL to 75 per cent with a transactional value of around $340 million at current exchange rates.
The cash offer has been made at Rs 1,210 per share, representing a premium of 29 per cent to the closing share price on May 31, 2013, and a premium of 12 per cent to CRISIL’s all-time closing high on the National Stock Exchange (NSE), the company said. McGraw Hill Financial will finance the transaction with existing cash resources.
The stock shot up to hit the upper circuit of the day at Rs 1,129.90, up 20 per cent in the early trading hours on the BSE in a weak Mumbai market on Monday.
“The offer also provides liquidity opportunity to current CRISIL shareholders. The stock had an average daily trading volume of 32,551 shares cumulatively on the NSE and the BSE during the past 12 months,” the company added.
“We intend to keep CRISIL a listed public, independent company to maintain its leadership and essential role across the Indian economy, and to preserve the entrepreneurial, growth-oriented spirit of the high-performing CRISIL team,” said Harold McGraw III, chairman, president and CEO of McGraw Hill Financial.
“Since 1996, we have had a productive relationship with CRISIL, which has demonstrated a durable record of strong top-line and bottom-line growth,” said Douglas Peterson, president of Standard & Poor’s Ratings Services, a business unit of McGraw Hill Financial.
The tender offer period is expected to begin in July 2013 and conclude in early August this year. The transaction will be immediately accretive to McGraw Hill Financial’s earnings per share, it added.
CRISIL and S&P Ratings Services first signed an affiliation agreement in 1996. The relationship was further strengthened in 1997 when McGraw Hill Financial acquired its initial equity stake in CRISIL. In 2005, McGraw Hill Financial became CRISIL’s majority shareholder.
Over the past five years, CRISIL’s revenues increased at a compound annual growth rate (CAGR) of 19.3 per cent. In 2012, CRISIL had total revenues of Rs 978 crore or $173.1 million, 63 per cent of which was generated outside of India, and net income of Rs 220 crore or $39 million.
Morgan Stanley is the manager to the open offer.
(Edited by Sanghamitra Mandal)