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McGraw Hill Raises Stake in CRISIL

Zacks Equity Research

In a recent development, McGraw Hill Financial, Inc. (MHFI) increased its stake in CRISIL, a global analytical company, to 67.8% from 52.8%. McGraw Hill Financial acquired 10,623,059 equity shares or 15.1% of the outstanding equity shares for about $214 million in cash.

McGraw Hill Financial and CRISIL first came together in 1996 through an affiliation agreement, while in 1997 McGraw Hill Financial acquired its initial stake in CRISIL. In 2005, the company further enhanced its position by acquiring majority stake in CRISIL.

Though the company paid a premium of 29% to the closing share price of CRISIL on May 31, 2013, we believe the move is strategic fit for McGraw Hill Financial as it now focuses more on core financial areas that would strengthen its position in ratings business.

In the past, the company's strategic investments in businesses have facilitated McGraw Hill Financial to grab a wider market through superior functionality and investor oriented services and in turn help boost the top- and bottom-line results of the company.

The formation of S&P Dow Jones Indices coupled with S&P Capital IQ’s acquisitions of Credit Market Analysis Limited, QuantHouse, R2 Financial Technologies and TheMarkets.com position it well against other industry majors like privately held Fitch, Moody’s Corp. (MCO) and Dun & Bradstreet (DNB).

McGraw Hill Financial now primarily focuses on capital and commodities markets. It reclassified its Education segment as discontinued operations, which was divested to Apollo Global Management LLC (APO) for $2.4 billion in cash.

The company also raised its earnings guidance and now expects earnings in the range of $3.15 – $3.25 per share for 2013 compared with its earlier guidance range of $3.10 – $3.20. McGraw Hill Financial holds a Zacks Rank #3 (Hold).

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