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Moody's Closes Divestiture of Analytics Knowledge Business

Zacks Equity Research

Moody’s MCO has closed the divestiture of MAKS, its Moody’s Analytics Knowledge Services business, to a London-based private equity firm Equistone Partners Europe Limited. The deal was announced in July.

MAKS is one of the prominent providers of knowledge process outsourcing services. Through delivery centers in India, Costa Rica, Sri Lanka and China, it serves more than 250 banks, asset managers and consulting firms.

At the time of announcing the deal, Moody’s had noted that it is likely to use the sale proceeds and repatriated offshore cash from this transaction to repurchase nearly $300 million worth of shares. Further, the deal is expected to be dilutive to 2019 GAAP earnings by up to 20 cents per share, while its impact on adjusted earnings will likely be negligible.

Moody’s has been restructuring its operations with an aim to diversify its footprint globally and pursue growth in areas outside the core credit ratings service. In sync with this, the company has undertaken several opportunistic buyouts over the past year.

Specifically, the company is making efforts to strengthen the Moody’s Analytics division. In October, it announced plans to acquire a minority stake in China-based SynTao Green Finance, while it acquired ABS Suite from Deloitte & Touche LLP.

Additionally, in July, Moody’s acquired RiskFirst, a leading FinTech company (provides risk analytic solutions for the asset management and pension fund communities). Also, it acquired a majority stake in Four Twenty Seven, Inc., a leader in providing data, intelligence and analysis related to physical climate risks.

All these buyouts are expected to be accretive to Moody’s earnings, going forward. Also, a strong balance sheet and liquidity position enables the company to pursue growth opportunities and enhance shareholders' value.

Shares of the company have jumped 55.7% so far this year, outperforming the 19.6% rally of the industry.

Currently, Moody’s carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Several other financial institutions are undertaking similar actions to overcome tough operating backdrop. In the recent months, Stifel Financial Corp. SF, Ameriprise Financial AMP, WisdomTree Investments, Inc. and Ally Financial ALLY, among others have been restructuring their businesses with an aim to improve operating efficiency and further boost revenues.

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