Credit-rating agency Crisil announced it had taken 8.9% stake in local rival Credit Analysis & Research (CARE), in what analysts said was the first step towards a potential acquisition of the company in the future.
Crisil, a subsidiary of Standard & Poors, purchased 26.22 lakh shares at `1,659.79 from Canara Bank in a bulk deal executed early on Thursday morning, stock market data showed. More importantly , the `435.26-crore deal gives Crisil a foothold into a rival agency.
According to bankers, Crisil is setting the stage for an acquisition. “There is no other logic except preparing the stage for a future acquisition. This makes Crisil the second largest shareholder in CARE behind LIC,“ said an investment banker who had studied CARE closely for a client.
Bankers said the transaction is an interesting one because Crisil is considered a company with better prospects. “Crisil has diversified business with 1/3rd of the revenue coming from advisory services, so they are not as dependent on ratings as CARE is. They have a more premium offering and a better market perception for their ratings. So, in that sense this share purchase is just Crisil protecting its turf possibly for a future acquisition,“ said a banker familiar with both companies.
Source: Economic Times