JANA spells out plan to bust-up McGraw-Hill


JANA Partners and the Ontario Teachers’ Pension Plan Board, which JANA represents, have continued to buy hundreds of thousands of shares of McGraw-Hill Companies as they push company management to split up McGraw-Hill. And it turns out that what they want is a lot more than just a split into two companies.

JANA representatives met with McGraw-Hill management on August 22. A 26-page Powerpoint presentation from the meeting was filed with the SEC. What JANA is pushing for is a huge transformation of the company – and it insists that what McGraw-Hill management has under consideration, spinning off the struggling Education division, does not go nearly far enough.

McGraw-Hill already has the company’s television stations up for sale. But even after that takes place, plus last year’s divestiture of BusinessWeek, there will still be an Information & Media division consisting mainly of subscription business-to-business publications and data services. They operate under the brand names JD Power & Associates (consumer research), Platts (energy and commodities), McGraw-Hill Construction and Aviation Week.

“Information & Media is an exciting growth story lost in McGraw-Hill among larger businesses,” said JANA. It wants the unit separated from the parent company to better benefit shareholders.

As you would expect, JANA wants to separate McGraw-Hill Education from the rest of the company. It also wants to separate the S&P Index Business. So, under the JANA plan McGraw-Hill would become not two, but four separate companies.

JANA also wants McGraw-Hill to “collapse its corporate overhead and right size its segment cost structures to achieve peer margins.” And it wants the company to accelerate its share buyback ahead of the restructuring to “maximize the resulting shareholder value.”

The presentation also notes that the Standard & Poor’s ratings service overshadows all other parts of McGraw-Hill in the public eye. Certainly that has been the case since S&P downgraded the debt of the US government. It was big news Monday (8/22) when McGraw-Hill announced that Deven Sharma (whom most Americans had never heard of until quite recently) would step down next month as President of S&P, to be succeeded by current Citibank COO Douglas Peterson.