Moody’s (MCO) to Acquire Reis Shares in a Cash Deal of $278M

Moody's Corporation MCO has agreed to acquire all the outstanding shares of Reis, Inc. REIS for $278 million in cash. The deal is expected to be completed by fourth-quarter 2018.

Being the leader in providing commercial real estate (CRE) data, Reis is a preferred choice for various property developers, managers, investors, lenders and brokers. With nearly 40 years of experience, the company offers analysis and forecasts on almost 275 metropolitan markets and 7,700 submarkets.

With the acquisition of Reis, Moody’s Analytics will be in a position to further expand its network of data and analytics providers in the CRE space. Moreover, it will be better positioned to allow customers to make faster financial decisions.

The president of Moody's Analytics, Mark Almeida stated, “Commercial real estate is analytically very complex, and Reis has committed decades of effort and expertise building a unique data asset with critical and hard to replicate information on this large and important asset class. Their data on CRE supply and Moody’s Analytics’ insights on the demand for commercial properties will provide market participants with a powerful 360-degree view of the economics of CRE lending and investment.”

Lloyd Lynford, the CEO of Reis said, “Joining with Moody’s will accelerate our founding vision of bringing transparency to the commercial real estate asset class and superior decision support to all commercial real estate professionals.”

Terms of the Deal

Per the agreement, the acquisition will take place in two steps. Firstly, Moody’s will place a tender offer to acquire all the issued and outstanding common shares of Reis for $23.00 per share in cash. The closing of the transaction is subject to regulatory approvals, which includes the tender of a majority of the issued and outstanding common shares of Reis, along with the clearance, under the Hart-Scott-Rodino Antitrust Improvements Act.

Notably, Moody’s has also made tender and support agreements with some of Reis management stockholders. Under this agreement, those stockholders have committed to accept the tender offer and hence tender all of their shares of Reis common stock, which represents nearly 18% of Reis’s total issued and outstanding shares.

Now, once the tender is accepted, the second step is where Moody’s is going to acquire all the remaining shares of Reis at the above-mentioned price. Following which, Reis will become a wholly-owned subsidiary of Moody’s.

On a GAAP basis, the acquisition is expected to be accretive to the earnings per share (EPS) of Moody’s in 2020. On the other hand, after excluding the purchase price amortization, the deal is expected to be accretive to Moody’s’ 2019 EPS.

Notably, Moody’s remains well positioned for growth on the back of its dominant position in the credit rating industry, diverse revenue base and synergies from acquisitions.

Shares of the company have gained 32.1% in the past year against 4.9% decline recorded by the industry.

Currently, Moody’s carries a Zacks Rank #3 (Hold).

A couple of better-ranked stocks from the finance space are On Deck Capital, Inc. ONDK and Comerica Incorporated CMA. Both the stocks currently sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

On Deck Capital has witnessed an upward earnings estimate revision of 32.3% for the current year over the past 60 days. Its share price has increased 75.3% in the past year.

Comerica’s Zacks Consensus Estimate for the current year has been revised nearly 5.1% upward in the past 60 days. Its shares have gained 39.6% in the past 12 months.

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