Break it up
Less than a month after purchasing a combined 5.2% stake in the company, shareholders Jana Partners LLC and the Ontario Teachers’ Pension Plan are proposing McGraw-Hill break into four parts to unlock value for shareholders. The four units would consist of Standard & Poor’s, the S&P index business, information & media and education according to regulatory document filed by Jana late Tuesday.
A source close to the matter said McGraw-Hill officials, who met with the two shareholders on Tuesday, did not respond to the proposal. Executives are reportedly looking at splitting the company in two, with the education unit being sold off. Jana’s filing said the company “has consistently underperformed its potential and traded at a sizable discount to its intrinsic value, primarily due to operational challenges, capital inefficiencies and structural complexity caused by its conglomerate structure.”
JP Morgan Chase estimates a breakup could mean an additional $5 billion in
shareholder value. Separately, the company announced that it was replacing S&P President Deven Sharma after its decision to downgrade U.S. debt earlier this month. The unit has been under scrutiny since an April Senate report that suggested S&P and Moody’s held inflated credit rating on mortgage-backed securities during the housing boom.
McGraw-Hill Companies (MHP : NYSE : US$41.30), Net Change: 2.61, % Change: 6.75%, Volume: 5,374,933