McGraw-Hill Cos. is set to split into two public companies, with one focused on education and the other on capital markets.
The decision follows a yearlong review of the company’s business. Investors—including the Ontario Teachers’ Pension Plan (Teachers’)—have been pushing the New York company to boost its stock price, which has dropped by more than 40% since 2006.
Teachers’, along with fellow shareholder Jana Partners, has been urging the company to spin off into four separate companies: an education division, an information and media division (which includes Platts and J.D. Power), a financial division (which includes Capital IQ and would include S&P’s ratings division) and an index business (which includes the S&P 500).
McGraw-Hill had disclosed a strategic review of its business in June, several weeks before Jana and Teachers’ increased their collective stake in McGraw-Hill to 5.2%.
The company’s S&P ratings agency has been under fire for its recent downgrade of U.S. debt, as well as several bad calls it made leading up to the financial crisis and economic meltdown that began in 2008. The unit’s president stepped down last month.
McGraw-Hill said it will also accelerate share buybacks to a total of $1 billion for 2011. It has bought back about half that amount to date.
The markets business expects 2011 revenue of about $4 billion, with almost 40% of it from international markets. The education segment is forecasting revenue of about $2.4 billion for the year.
The company said the split will create more “sharply defined,” focused companies that will make it easier for investors to assess their value.
Shares of McGraw-Hill rose 89 cents, or 2.3, to $39.61 in morning trading after rising as high as $40.44 earlier in the session. The stock has traded in a 52-week range of $29.43 and $45.47.