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McGraw family involved in restructuring efforts

By Giulia Cambieri

McGraw-Hill will separate into two public companies – McGraw-Hill Markets and McGraw-Hill Education – ending the McGraw family’s 123-year involvement in the education publishing business, it has been announced.

The split, which has been approved unanimously by McGraw-Hill’s board of directors, is part of the company's portfolio review that began in the second half of 2010.

In a conference call on 12 September, McGraw-Hill’s chairman, president and chief executive officer Harold McGraw III said the board was “determined that the best way to deliver enhanced shareholder return was to separate into two operating companies that would have … financial flexibility and strong market positions”.

McGraw-Hill Markets, which expects 2011 revenues of approximately $4 billion (€2.93 billion), will focus on the global capital, commodities and commercial markets, while McGraw-Hill Education will operate in the education services and digital learning markets.

The markets division will include the credit-rating agency Standard & Poor’s, index business S&P Indices, multi-asset class research vehicle S&P Capital IQ, and Platts, a provider of information and indexes in energy, petrochemicals and metals.

McGraw-Hill Education, which anticipates revenues of approximately $2.4 million (€ 1.75 billion) in 2011, offers both print and online educational materials.

Harold McGraw will lead McGraw-Hill Markets, while Robert Bahash, currently president of the education segment, will serve as president of McGraw-Hill Education until the newly formed company finds a CEO.

The New York-based group said in a statement that it expects to complete the transaction by the end of 2012 through a tax-free spinoff of the education business to McGraw-Hill shareholders.

McGraw-Hill Companies also announced a cost reduction programme that will seek to cut over $1 billion of corporate expenses and administrative and technology costs.

The decision to split the company into two comes after activist investors Jana Partners and the Ontario Teachers’ Pension Plan, which own 5.2% of McGraw-Hill’s shares, called for the company to be split into four divisions in August.

McGraw-Hill was founded in 1888 by James McGraw and John Hill and is often seen as a family business, despite Harold McGraw, the great-grandson of James McGraw, only owning 4% of the company. 

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