McGraw Hill to buy SNL Financial for $2.23 bln

Target: SNL Financial

Price: $2.23 bln

Buyer: McGraw Hill Financial Inc

Seller: New Mountain Capital LLC

The deal will strengthen McGraw Hill’s data analytics unit, S&P Capital IQ, particularly in providing information on banking and insurance, the company said on Monday.

McGraw Hill’s shares fell 3.1 percent to $102.28 in early trading on the New York Stock Exchange.

“We are not entirely sure that investors were hoping to see a major acquisition add to the Capital IQ segment, as opposed to higher margin and lower competition areas such as rating and indices,” UBS analysts said in a note.

SNL Financial, owned by private equity firm New Mountain Capital LLC, has about 3,000 employees in 10 countries.

McGraw Hill, which also reported a better-than-expected second-quarter profit on Monday, said the deal was expected to add to adjusted diluted earnings per share in 2016, excluding amortization.

The financial impact of the acquisition will be mitigated by tax benefits of about $550 million, the New York-based company said in a statement.

The company’s ratings and indexes units have been driving earnings in the past few quarters.

In the quarter ended June 30, McGraw Hill’s adjusted diluted earnings per share from continuing operations jumped 17 percent to $1.21, helped by gains from legal settlements and the sale of a legacy construction business asset.

Analysts on average had expected $1.13 per share, according to Thomson Reuters I/B/E/S.

Standard & Poor’s Ratings Services, which is the biggest unit by revenue, reported a 1 percent fall in revenue, while revenue from S&P Dow Jones Indices rose 11 percent.

S&P Capital IQ revenue rose 6 percent to $324 million.

Total revenue rose 3 percent to $1.34 billion.

The company maintained its full-year forecast for adjusted earnings per share of between $4.35 and $4.45, despite expectations of a 5-7 cent dilution from the deal.

Rival Moody’s Corp reported a better-than-expected quarterly profit on Friday, driven by strong growth in its analytics business.

Thomson Reuters Corp competes with McGraw Hill in providing information related to financial and commodities markets.

Reporting by Richa Naidu and Neha Dimri in Bengaluru.