DBRS, the world’s fourth-largest credit ratings agency, has reached a definitive agreement to be acquired by Chicago-based Morningstar, Inc., a leading provider of independent investment research, for a purchase price of $669 million. The combination of DBRS with Morningstar Credit Ratings’ U.S. business will expand global asset class coverage and provide an enhanced platform for providing investors with leading fixed-income analysis and research.

“DBRS’s more than 40 years of experience and success coupled with Morningstar’s proven capabilities will offer an even stronger global alternative to larger ratings agencies,” said DBRS Chief Executive Officer Stephen Joynt. “Both DBRS and Morningstar are driven by similar core values that aim to bring more clarity, diversity, transparency, and responsiveness to the ratings process, which makes Morningstar a perfect fit for us.”

“The chance to empower investors with the independent research and opinions they need across a multitude of securities first drove our decision to enter the credit ratings business,” said Morningstar Chief Executive Officer Kunal Kapoor. “DBRS and Morningstar share research-centric cultures committed to rigour and independence. Together, we believe we can elevate the industry with the world’s first fintech ratings agency backed by state-of-the-art models, modern technology, and expert research teams that issuers and investors can count on to deliver transparent and independent ratings.”

For more than 40 years, DBRS has built a strong market presence across Europe, the U.S., and especially Canada. As the world’s fourth-largest credit ratings agency, the company rates more than 2,400 issuer families and nearly 50,000 securities worldwide. The Carlyle Group and Warburg Pincus led the acquisition of DBRS in 2014.

DBRS reported $167 million USD in revenue for the fiscal year ended November 30, 2018. The business generates strong cash flow with operating margins that are consistent with Morningstar’s overall business. On a preliminary pro forma basis, if Morningstar owned DBRS as of Dec. 31, 2018, revenue from credit ratings would have represented approximately 17 per cent of Morningstar’s total revenue.

DBRS has more than 500 people spread across seven locations and will continue to be led by its existing management team. Morningstar intends to name a leader of the combined businesses by the time the deal closes, and the companies plan to work together on decisions over time regarding the integration to ensure the combination is set up for long-term success.

Morningstar intends to fund the transaction with a mix of cash and debt, which will include the placement of a new credit facility at closing. The transaction is expected to be accretive to net income per share in the first fiscal year after completion with an estimated closing in the third quarter of 2019, subject to regulatory approval and customary closing conditions.

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