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McGraw-Hill to Split Into Two Units

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Sept 12 – Sept 18, 2011 Edition McGraw-Hill to Split Into Two Units

NEW YORK, NY/AUTHORLIK NEWS/Septemer 12, 2011—Media conglomerate McGraw-Hill will split into two units by the end of next year—one public company aimed at the capital and commodity markets, and another for the education market. The objective is to accelerate growth.

The split, called “the growth and value plan” will cut the group’s $1bn cost base into two separate head offices, and the move is designed to accelerate share repurchase plans to buy back $1bn of stock this year, according to Terry McGraw, chairman and chief executive. The move spins off McGraw-Hill Education into a tax-free entity, subject to approval from the board and US taxing authorities.

Mr McGraw will lead the new McGraw-Hill Markets, but a search is underway for a new chief executive of the education company. Robert Bahash, currently president of the education division, will temporarily stay on as president until a CEO is hired.

“After thorough analysis, the board determined that the creation of these two independent companies is the best and most reliable way to generate superior shareholder value,” Mr McGraw said.

“Because both companies will be sharply defined, they will create two pure-play investment opportunities and present a more transparent capital markets profile, enabling investors to better assess their value, performance and potential.”

McGraw-Hill Markets, comprising about $4bn in annual revenues, will include the Standard & Poor’s rating agency; S&P Indices; S&P Capital IQ, the financial data and research business; and Platts, the group’s energy and metals information and indices business. The company is counting on synergies between these businesses to drive “double-digit growth and profitability”.

McGraw-Hill Education will be the second-largest education publishing company by sales in the world after Pearson, which also owns the Financial Times. This unit has about $2.4bn in revenues.

The split will allow the company to “augment its organic growth with digital services and/or via acquisitions and strategic partnership”, McGraw-Hill said, and would enable it to better capitalize on opportunities in fast-growing markets including China, India and Brazil.