Following the call for a break-up and reorganization of McGraw-Hill Cos. by investors last month, McGraw-Hill announced today that it will split into two separate public companies: McGraw-Hill Markets, focused on the capital and commodities markets, and McGraw-Hill Education, focused on education services and digital learning.
McGraw-Hill Markets will be led by Terry McGraw as chairman, president and CEO and will include the company’s publishing assets serving construction and aviation, as well as Standard & Poor’s, S&P Indices, S&P Capital IQ, which provides research and multi-asset class data, and Platts, which serves the energy, petrochemical and metals markets. McGraw-Hill says it expects McGraw-Hill Markets to generate $4 billion in 2011, with 90 percent of revenue coming from the capital and commodities businesses.
McGraw-Hill Education will become an independent business serving the K-12, higher education and professional education markets, with expected revenues of $2.4 billion in 2011. Longtime McGraw-Hill CFO Robert Bahash currently oversees McGraw-Hill Education and the company is searching for a new CEO for the group.
The move is part of a three-part "growth and value plan" that include creating the two pure-play companies; extension cost reduction focusing on more than $1 billion in corporate expenses including disaggregating shared services and establishing two corporate centers, and share repurchases totaling $1 billion in 2011 (the company says it has repurchased $540 million shares to date).
McGraw-Hill shares were up 2.6 percent to $39.7 in premarket trade.
Investors including hedge fund Jana Partners LLC and the Ontario Teacher’s Pension Fund had previously said breaking up McGraw-Hill would increase value for shareholders. The split will be treated as a tax-free spinoff of the education business for McGraw-Hill shareholders. McGraw-Hill expects the move to be complete by the end of 2012.
Through the first six months of 2011, McGraw-Hill saw a 7.4 percent increase in revenue to $2.86 billion and a 12.5 percent increase in net income to $340.1 million. The McGraw-Hill Information and Media Group posted a 10 percent jump to $473.5 million in the first half of the year.