McGraw Hill to sell J.D. Power to XIO Group

(Reuters) - McGraw Hill Financial Inc MHFI.N agreed on Friday to sell car rating unit J.D. Power and Associates to buyout firm XIO Group for $1.1 billion in a move set to expand the well-known brand into Asia given XIO's links to the region.

Reuters had reported on Thursday that XIO Group was close to a deal to buy J.D. Power, which provides data on performance improvement and customer satisfaction for big brands.

This is the first U.S.-based acquisition for XIO Group, which was founded in 2014. XIO updated its website on Friday to list its headquarters in London and said it had operations in places such as Germany, Hong Kong and mainland China.

XIO’s expertise is to buy companies in North America and Europe and help them expand their footprint in fast-growing markets in Asia, XIO’s chief executive Joseph Pacini said in an interview.

“We see this as an iconic and trusted brand,” Pacini said, “We have the ability to work with potential customers in fast growing markets, particularly in Asia.”

XIO's four founding partners have experience in international and Asian markets, having previously worked at BlackRock Inc BLK.N, Permira Advisers, Olympus Corp 7733.T and China International Capital Corporation (CICC), Pacini said.

He added that the firm’s thesis is to invest in sectors that could benefit from the economic shift in Asia toward consumption and away from export-driven growth. Investors in XIO Group’s $5 billion fund are a “diversified set of institutional investors just like any private equity firm,” Pacini said

McGraw Hill Financial, the parent of Standard & Poor’s ratings agency, said in October it was exploring a sale of J.D. Power, which had annual revenue of about $350 million.

The deal is expected to close in the third quarter.

The McGraw Hill unit was started by J.D. "Dave" Power and wife Julie in 1968 from their home in Calabasas, California, and landed Toyota Motor Corp 7203.T as their first client.

While J.D. Power’s roots are in its car research, its annual customer satisfaction surveys measure a range of industries, from credit cards to hotel loyalty programs and cable companies, and are often cited in advertisements and commercials.

Morgan Stanley MS.N advised McGraw Hill on the deal, while Moelis & Co MC.N advised XIO. XIO said it was not disclosing details of the deal's debt financing, but added it was speaking to U.S. institutions about financing.

Reporting by Liana B. Baker in New York and Sudarshan Varadhan in Bengaluru; Editing by Don Sebastian and Andrew Hay