McGraw-Hill Announces Comprehensive Growth and Value Plan to Increase Shareholder Value
NEW YORK, Sept. 12, 2011 /PRNewswire via COMTEX/ -- The McGraw-Hill Companies (NYSE: MHP) today announced that its Board of Directors has unanimously approved a comprehensive Growth and Value Plan that includes separation into two strong public companies: McGraw-Hill Markets, primarily focused on capital and commodities markets, and McGraw-Hill Education, focused on education services and digital learning.
The three-part Plan is designed to accelerate growth and increase shareholder value by:
1. Creating two "pure-play" companies with the scale, and the capital and cost structures to fully leverage their world-class franchises, iconic brands, and leading market positions
2. Reducing costs significantly to ensure efficient operating structures for the two new companies
3. Accelerating the pace of share repurchases to a total of $1 billion for the full year 2011 (approximately $540 million repurchased year to date)
The Growth and Value Plan will create two focused operating companies with deeper customer engagement, right-sized cost structures, and increased management focus and accountability. The creation of two companies with tailored capital structures and financial policies will also enhance strategic and financial flexibility and establish two attractive equity currencies.
Harold (Terry) McGraw III, Chairman, President and Chief Executive Officer, said, "Our Growth and Value Plan will transform a multifaceted corporation into two powerful companies, each with highly focused strategies, aligned customer bases and interconnected markets. 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. 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: A Global Leader Focused on Capital and Commodities Markets
McGraw-Hill Markets, the working name for this Company, will include the following iconic brands in the capital and commodities markets: Standard & Poor's, the world's foremost provider of credit ratings; S&P Indices, the world's leading index business; the newly launched S&P Capital IQ, a leading global provider of multi-asset class data, research, benchmarks and analytics; and Platts, the leading global provider of information and indices in energy, petrochemicals and metals. Combined, the capital and commodities businesses account for approximately 90% of McGraw-Hill Market's annual revenues.
McGraw-Hill Markets will also include businesses in attractive commercial sectors such as J.D. Power and Associates, a global market research and services company, and leading franchises in the construction and aerospace industries.
McGraw-Hill Markets serves customers in more than 150 countries and expects 2011 revenues of approximately $4 billion with close to 40% from international markets. The Company expects to drive double-digit growth and profitability by expanding upon and fully exploiting the many operational and strategic synergies that exist among McGraw-Hill Markets' brands, including overlapping customer bases, shared technology platforms, optimized access to global capital markets, and an international employee base active in growth markets. McGraw-Hill Markets' scale and leadership positions will also enable it to capitalize on growth trends and extend its platforms in fast-developing emerging markets.
Mr. McGraw continued, "There is a growing need for investors to be able to track price movements across all asset classes. At the same time, there is a dearth of tools which meet this need. This creates an existing and fast-growing opportunity for McGraw-Hill Markets to deliver integrated solutions on commodities, fixed income, equity, credit, and funds that inform strategy and trade ideas on cash, derivatives and volatility indices. When our premier brands are combined into one focused operating company, McGraw-Hill Markets immediately becomes the player with the greatest breadth of capabilities in the financial markets."
McGraw-Hill Education: A Global Leader in Education
McGraw-Hill Education expects revenues of approximately $2.4 billion in 2011. As an independent education company, it will be able to optimize its solid cash generation capabilities and strong balance sheet to pursue accelerated growth strategies and augment its organic growth with digital services and/or via acquisitions or strategic partnerships. For example, it will have greater flexibility to develop and deploy new products and services to address secular trends toward digital education platforms and to pursue higher-margin opportunities in educational services such as online instructional and school digital services. Internationally, the company will be better positioned to capitalize on education spending and adult skills training in China, India, Brazil and other emerging markets, which are projected to continue to grow at double-digit rates.
As part of the Growth and Value Plan, a search is underway to recruit a CEO for McGraw-Hill Education. Robert Bahash, currently President of the Education segment, has contributed significantly to the development of plans for the independent Education company and will continue as President until the new CEO has been appointed.
From Strategic Portfolio Review to Growth and Value Plan
Today's announcement results from the comprehensive portfolio review of McGraw-Hill's businesses that began in the second half of 2010. The review, which was conducted by management and the Board with assistance from external advisors, was designed to unlock and increase shareholder value by prioritizing areas of future investment and modifying organizational structures to sharpen focus, increase efficiencies, and accelerate growth.
As a result of this review, the Company thus far has:
Today, the Company announced it will market its unique combination of multi-asset-class data, benchmarks and analytics products under two master brands, S&P Capital IQ and S&P Indices, to reflect customers' desire to receive high-value content through a consolidated set of powerful global platforms. Customer and market research concluded that these two brands complement each other and provide significant brand extension in the financial information industry.
Cost Reduction Program
Accelerated Share Repurchases
The Company's financial advisors are Goldman Sachs and Evercore Partners.
Conference Call/Webcast Scheduled for 8:30 AM Eastern Time on September 12, 2011:
Webcast Instructions: Live and Replay
Telephone Access: Live and Replay
The recorded telephone replay will be available beginning two hours after the conclusion of the call and will remain available until October 12, 2011.
Presenters' Slides & Remarks
George Sard, Brandy Bergman, or Michael Henson of Sard Verbinnen & Co
SOURCE The McGraw-Hill Companies