Monday, November 26, 2012

McGraw-Hill to sell its education business to Apollo Global Management, rename itself McGraw Hill Financial

Back in the early nineties I was recruited to McGraw-Hill to run a trade publication. My own impression of McGraw-Hill was that it was a publishing giant, but I was wrong – the company, instead, saw itself as a financial services company burdened by a portfolio of publishing titles. Slowly the company has transformed itself by selling off much of its portfolio including BusinessWeek, and today its education division.

Today McGraw-Hill announced that it had sold off its McGraw-Hill Education business to investment funds affiliated with the private equity company Apollo Global Management, LLC. The sales price is $2.5 billion.

"After carefully considering all of the options for creating shareholder value, the McGraw-Hill Board of Directors concluded that this agreement generates the best value and certainty for our shareholders and will most favorably position the world-class assets of McGraw-Hill Education for long-term success," said Harold McGraw III.

The sale will now allow McGraw-Hill to rebrand itself as McGraw-Hill Financial with expected revenues of $4.4 billion annually. Total revenue for 2011 was $6.246 billion. The company's leading brand names will be Standard & Poor's, Platts and J.D. Power and Associates.

The company still has some divisions that will be hanging on including McGraw-Hill Construction which includes the Dodge products, Sweets, Engineering News-Record and Architectural Record. This is the division I worked for back in the early nineties. One could visualize the company retaining this division as part of its financial services repositioning, though a sale to another PE is not out the question either (and has been expected by some observers).

McGraw-Hill has been a major player in the education market – both in pre-K to 12 and in higher education. But the textbook field is in transition to digital media and McGraw-Hill has been slow to adjust, and in fact has lagged behind many other media companies in this regard.