CRISIL surges as McGraw Hill offers to raise stake

REUTERS - McGraw Hill Financial Inc, which owns Standard & Poor's rating agency, said on Monday it would make a voluntary open offer to raise its stake in CRISIL to 75 percent in a deal worth about $340 million.

The announcement comes a little over a month after Unilever said it plans to pay up to $5.4 billion to raise its stake in its Indian unit, betting on the strength of demand for personal care and food products in India.

McGraw Hill, which owns 52.77 percent of credit rating and research company CRISIL, plans to acquire up to 15.7 million shares, or a 22.23 percent stake, through the open offer, the company said in a statement.

As per Indian regulations, the parent of a listed Indian company can own a maximum of 75 percent stake in the unit.

"Cash-rich global firms like McGraw Hill are increasingly looking to raise their stakes in the Indian units to better capture the growth prospects in this emerging market," said a source with knowledge of the transaction.

"McGraw already owns more than half of its Indian subsidiary and by investing $300 million odd they would have more control over the cash flow of CRISIL and would reap the benefits of higher returns in the medium to long term," he said.

The source declined to be named as he was not authorised to speak to the media.

Shares in CRISIL jumped by their maximum daily limit of 20 percent in the Mumbai market after the announcement.

The open offer price has been set at 1,210 rupees a share, a premium of roughly 29 percent over the Indian company's share price on Friday. Some analysts said that the offer price was attractive for public shareholders.

Harold McGraw III, chairman, president and CEO of McGraw Hill Financial, said that the offer represented "a vote of confidence" in the Indian unit.

McGraw Hill plans to keep CRISIL a listed company, he said.

The CRISIL offer is expected to begin in July and conclude in early August, the McGraw Hill statement said, adding the company would finance the transaction with existing cash reserves. The transaction would be accretive to McGraw Hill's earnings per share, it said.

(Reporting by Sumeet Chatterjee in MUMBAI; Editing by Matt Driskill)