Morningstar Looks Overseas to Invest $300 Million in Companies Not Tied to the U.S. Economy

$300 million seems like a few pennies these days huh…

MUMBAI (Reuters) – Morningstar (MORN.O), best known for rating funds and stocks, may use part of its about $300 million cash holdings for acquisitions, with an eye on overseas assets as it looks to build a business less dependent on the U.S. economy, a top executive said on Friday.

The firm, which earns three quarters of its revenue in the United States, is also open to buying back shares or paying dividends, but the priority was acquisitions as the global slump opens up opportunities, Chief Financial Officer Scott Cooley said.

“We are attracted to the better pricing that is available when we buy assets in this sort of an environment,” Cooley, who was in Mumbai to formally launch Morningstar’s India business, told Reuters in an interview.

“Given that there are a lot of firms that are a little more distressed right now, and given that we have cash and the pricing is getting a little better, then I think our odds of having further acquisitions are very good,” he said.

Morningstar, popular for rating mutual funds, hedge funds and stocks, spent $105 million in 2008 to acquire six firms, including media and investor relations website businesses from Ipreo Holdings LLC for $51.6 million in cash.

The firm closed four acquisitions in the fourth quarter of last year, three of them outside of the United States.

“We think the stronger dollar makes acquisition a little bit cheaper for us. We do feel like we want to have to diversify our revenue and profit streams… we don’t want to be so concentrated in U.S. dollars,” Cooley said.

INDIA PLAN

Morningstar, founded by its Chairman and Chief Executive Joe Mansueto in his Chicago apartment in 1984, has assets under advisement of $66 billion and employees about 2,400 people, including nearly 200 in India.

The firm is starting to offer fund data, research and analytics on India’s $100 billion mutual fund industry and expects to start stock research for institutions in 2009, its Asia Chief Executive Jin Tian said.

India has more than a billion people with a median age of 25 years and a savings rate of more than 30 percent, making it a powerful lure for foreign financial firms.

UBS (UBSN.VX) and Japan’s Shinsei Bank (8303.T) are among more than 20 players waiting in the wings to join India’s 33-member industry, forecast to manage about $520 billion by 2015 and offering opportunities for investment and advisory services.

Morningstar, which faces competition from fund trackers such as Value Research, ICRA Online and CRISIL in India, expect to start making profits in 3-5 years, Tian said.

“We are not here really to try to compete and to get the larger piece of the cake. We are here to build a bigger cake,” he said. “It’s a strategic move.”

Morningstar has wide presence in Asia including China, Japan, Taiwan and Hong Kong and Tian said the firm was looking to start operations in Vietnam this year.