Business Context and Reporting Period
This Form 8-K Current Report, dated May 28, 2019, discloses that Morningstar, Inc. entered into a definitive agreement to acquire Ratings Acquisition Corp (DBRS), a credit rating agency incorporated in the Cayman Islands. The transaction is structured as a merger where a Morningstar subsidiary will merge with DBRS, resulting in DBRS becoming an indirect wholly-owned subsidiary of Morningstar.
Key Financial Metrics and Transaction Terms
- Purchase Price: Aggregate cash consideration of $669 million, subject to customary adjustments for cash, working capital, and indebtedness.
- Financing: Morningstar intends to fund the transaction using cash on hand and new debt financing.
- Debt Commitment: A commitment letter from Bank of America, NA provides up to $750 million in new debt, consisting of a $450 million term loan and a $300 million revolving credit facility, which will replace the existing senior credit facility.
- Shareholder Support: Holders representing approximately 94% of DBRS's outstanding shares have signed a Voting and Support Agreement to approve the merger.
Material Changes and Timeline
The filing represents a material change in Morningstar's capital structure and business scope through the proposed acquisition. The closing is expected to occur in the third quarter of 2019, subject to customary conditions including DBRS shareholder approval and the expiration of the Hart-Scott-Rodino waiting period. The agreement includes a termination right if the closing does not occur prior to September 30, 2019.
Outlook, Risks, and Contingencies
The transaction is contingent upon regulatory approvals and shareholder votes. The filing explicitly states that representations and warranties in the Merger Agreement are for the benefit of the contracting parties and should not be relied upon as characterizations of the actual state of facts by investors. The filing does not provide specific forward-looking financial guidance or revenue projections for the combined entity.
Key Facts for Investor Verification
- Confirmation of the final purchase price after working capital and debt adjustments.
- Receipt of required regulatory approvals, specifically under the Hart-Scott-Rodino Act.
- Finalization of the $750 million debt facility terms and interest rates.
- Completion of the DBRS shareholder vote to approve the merger.
- Impact of the acquisition on Morningstar's leverage ratios and liquidity position post-closing.