McGraw Hill Acquisition Latest Big Media Deal

In a Monday morning press release, McGraw Hillion Financial Inc. (NYSE: MHFI) announced that it has agreed to acquire SNL Financial in an all-cash deal worth about $2.23 billion. The total purchase price is partially offset by about $550 million in tax benefits resulting from the transaction.

SNL Financial is privately held by an affiliate of private equity firm New Mountain Capital and by current and former SNL management team members.

This is the single biggest media deal in a week that has seen Pearson plc (NYSE: PSO) sell its Financial Times newspaper for $1.3 billion to Japan’s Nikkei media company and then put Pearson’s 50% stake in The Economist magazine up for sale, and that could fetch another $600 million or so for the British company that is transforming itself into an education company. Last year Pearson sold its financial data company Mergermarket Group to a London-based private equity group for $624 million.

Where the SNL acquisition makes a fair amount of sense given McGraw Hill’s overall business, the transaction involving the FT and The Economist appear to be appeals to vanity buyers. It’s like buying a professional sports team minus the same likelihood of turning a profit.

And if the FT and The Economist can change hands, what about the New York Times? Perhaps Amazon founder and CEO Jeff Bezos wants another newspaper to add to his burgeoning media empire than already includes the Washington Post and an investment in Business Insider.

McGraw Hill will fund its acquisition of SNL with approximately $525 million in cash and $1.7 billion in new debt. The company expects the transaction to close in the current quarter and to be accretive to 2016 adjusted diluted earnings per share.

McGraw Hill’s stock traded down about 6% in the mid-morning on Monday at $99.33 in a 52-week range of $73.96 to $109.13. The stock closed at $105.58 on Friday and has a consensus price target of $117.25.

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