Dec 5 – Dec 11, 2011 Edition McGraw-Hill Splits Company Into Two Entities

NEW YORK, Dec. 8, 2011 /PRNewswire/ –The McGraw-Hill Companies (NYSE: MHP) yesterday provided an update on its Growth and Value Plan (announced September 12, 2011), which includes the creation of two independent companies: the newly named McGraw-Hill Financial, a world leader in content and analytics for financial markets, and McGraw-Hill Education, a global leader in education services and digital learning. This update includes several significant actions to facilitate the Corporation’s successful separation and deliver enhanced shareholder value.

Harold (Terry) McGraw III, Chairman, President and Chief Executive Officer of McGraw-Hill, said, “We believe the substantial actions we are taking to create two powerful new companies, McGraw-Hill Financial and McGraw-Hill Education, will increase their growth prospects and deliver superior shareholder value. McGraw-Hill Financial will comprise fast-growing and highly profitable global brands such as S&P Ratings, S&P Indices, Platts and S&P Capital IQ, creating the potential for double-digit growth, strong cash flow and profit margins in excess of 30%.

“At the same time, we are returning immediate value to shareholders. We are building on the successful $1 billion 2011 share repurchase program by launching today a new $500 million Accelerated Share Repurchase Transaction. We also have taken substantial actions to achieve cost reductions of approximately $50 million in annualized savings, making us highly confident that we will exceed our initial target of $100 million.

“Taken together, the increased share repurchases, substantial cost-cutting initiatives and creation of two powerful new companies position us to deliver increased value for our shareholders. Looking forward, 2012 could be the most exciting year in our history as we establish two dynamic and focused industry leaders positioned for superior growth and value.”

Increased Cost Reductions

McGraw-Hill announced today significant progress towards its cost reduction goals, which includes initiatives across the Corporation, as it ensures that the two new companies will have appropriate cost structures to drive margin expansion and invest selectively in attractive growth opportunities.

McGraw-Hill Education is reducing its executive ranks by approximately 20% and its workforce by approximately 10%, or about 550 positions, to create a flatter and more agile organization. To better capitalize on growth opportunities in the education market, McGraw-Hill Education will continue to reinvest resources into the creation of education services and digital products and solutions, moving more of its business towards a subscription-based model. The workforce reductions are expected to be substantially completed by the end of the fourth quarter, with some actions expected to close in the first half of 2012.

McGraw-Hill is also making changes to its pension program in order to better align its retirement plans with market practice. As of April 1, 2012, the Corporation will freeze its defined-benefit pension plan and focus its retirement program on market-competitive offerings. This move will result in more predictable retirement plan costs, cap future financial liabilities and better position the Corporation to grow and compete.

Taken together, the actions detailed above deliver approximately $50 million in annual cost savings, putting McGraw-Hill on track to exceed $100 million in cost reductions.

Going forward, the Corporation anticipates additional realignment to prepare for separation. For example, it will look to extend outsourcing efforts to enhance cost synergies and realign administrative support for a leaner overall cost structure. Future restructuring updates will be provided in 2012 as the separation process moves forward.

The Corporation expects to take a restructuring charge in the fourth quarter of 2011.