McGraw Hill Financial Inc. agreed to buy SNL Financial, the financial news and data services provider owned by buyout firm New Mountain Capital, for about $2.23 billion to add content on the banking and insurance industries.
SNL joins a roster of subsidiaries that includes Standard & Poor’s Ratings Services, the S&P Dow Jones Indices and Platts, which provides price data and analytics on commodities
McGraw Hill is buying SNL two years after staking its future on financial services by unloading its publishing business. The purchase is underscoring the interest in established firms that provide financial news and analytics. Japan’s Nikkei Inc. agreed last week to buy the FT Group from Pearson Plc for $1.3 billion, and Pearson sold Mergermarket to BC Partners, a London-based private equity firm, for 382 million pounds ($592 million) in 2013.
SNL has a track record of providing a “laser focus on data quality,” McGraw Hill Chief Executive Officer Doug Peterson on an investor call Monday morning. McGraw Hill intends to grow the business internationally, Peterson said, and the company projects profitability from the acquisition to come by 2017, according to a presentation.
New Mountain will reap a $952 million profit from the sale, according to a letter the buyout firm sent Monday to its investors, a copy of which was obtained by Bloomberg. That’s more than five times its 2011 equity investment, it said in the letter. Chuck Dohrenwend, a New Mountain spokesman at Abernathy MacGregor, declined to comment.
SNL has posted annual revenue percentage growth in the low-to-mid-teens, with about 91 percent of the company’s income coming from the Americas. Expanding that is an “attractive” opportunity, Peterson said.
McGraw Hill will finance the transaction by issuing $1.7 billion of long-term debt, the company said. The economic impact will be partly offset by tax benefits with an estimated present value of about $550 million, McGraw Hill said in a statement Monday.
SNL provides data and analysis on the banking, insurance, energy and real estate industries. New York-based New Mountain took a majority stake in the company in 2011 in a deal that valued SNL at $450 million.
“We saw the potential of the company four years ago,” Peter Masucci, chairman of the board of SNL Financial and a managing director of New Mountain Capital, said in an e-mailed statement.
Additional oil-sector coverage will be a clear priority, said McGraw Hill Chief Financial Officer Jack Callahan on the call, adding that the company is “committed” to SNL’s Charlottesville, Virginia-area location.
Bloomberg LP, the parent of Bloomberg News, competes with SNL in selling financial news and information.
McGraw Hill, based in New York, sold its education business three years ago for $2.5 billion to Apollo Global Management LLC to focus on financial services.
McGraw Hill moved up its second-quarter earnings results and on Monday reported revenue growth of 3 percent from a year ago to $1.34 billion. Earnings per share rose to $1.29 from $1.05 per share a year earlier, it said. That was helped by 6 percent revenue increase from S&P Capital IQ. The company’s credit ratings service declined 1 percent to $658 million.
McGraw Hill’s shares fell 5.7 percent Monday to $99.59 in New York.