McGraw-Hill is to divide into two separate companies, with McGraw-Hill Markets centered on capital and commodities markets, and McGraw-Hill Education focused on digital learning and education services.
The divide is to be carried out by the end of 2012 as the first part of a new growth and value plan being implemented by the company to boost shareholder benefits through a threefold approach. The second and third parts of the plan are to cut costs to afford strong operating structures for the new companies and to push share repurchases to $1 billion in 2011. So far in 2011 the company’s share buyback has been in excess of $540 million.
$4 Billion Profit Forecast for Markets Unit
McGraw-Hill Markets forecasts $4 billion in profit in 2011, with 40% represented by international markets. The company will house Standard & Poor’s (S&P) rating agency, S&P Capital IQ, and S&P Indices. It will equally encompass energy, metals, and petrochemicals data and indexes provider Platts.
Capital and commodities activities represent 90% of yearly profits made by McGraw-Hill Markets, which is present in over 150 countries. This year has seen the publishing giant announce its intension to sell off its broadcasting group due to its poor outlook.
The split takes the form of a tax-exempt spin-off of the McGraw-Hill Education business and is awaiting the green light from its board and state tax bodies. The decision comes after three fiscal quarters of falling profits for the company’s education sector.
McGraw-Hill Education, which is forecast to have profits of close to $2.5 billion this year, is on the lookout for a CEO. President of the education sector Robert Bahash continues to fill the top spot until a chief executive is chosen.
McGraw-Hill Education is a world leader in education, outranked only by Pearson. Its business activities span the full educational spectrum from kindergarten, primary and secondary, known as K-12, to third level and professional sectors. McGraw-Hill Education provides online and paper-based educational solutions for the K-12 education market, digital materials for primary and secondary schools, third level institutions and professional markets throughout the world.
Education Unit To Enjoy Boom in Emerging Markets
Evercore Partners and Goldman Sachs are acting as advisors in the split, which will leave McGraw-Hill in better standing to expand to its potential in growing markets such as Brazil, India and China. McGraw-Hill said dividing into two companies would allow it to “augment its organic growth and digital services and/or via acquisitions and strategic partnership,” quotes the Financial Times.
McGraw-Hill Education will likely cash in, both in schools and professional sectors, with its digital and online education systems for schooling and skills training within the working environment.
Growth in emerging markets is expected to remain in the double-digits.
Key Statistics – Global Publishing Industry (source: Publisher’s Weekly, Livres Hebdo 2010 Ranking)
- The top 80 publishing companies have total sales of more than €150 million.
- The top 80 publishing companies have total combined revenue of €51 billion.
- The top 10 of the world’s 80 biggest publishing companies hold some 58% of total industry revenue.
- The top 5 global publishers, according to turnover, are: 1st place goes to Pearson (UK); tied for 2nd spot are Reed Elsevier (UK/US/NL) and Pearson Education (UK); 3rd place goes to Thomson Reuters (US); 4th place goes to Wolters Kluwer (NL); and in 5th tied are Bertelsmann (Germany) and Lexis Nexis (NL). McGraw Hill is in 8th spot.