The McGraw-Hill Companies Inc.
) recently updated its growth and value plan through filing an
initial Form 10 Registration Statement with the U.S. Securities and
McGraw-Hill had initially announced its extensive growth and
value measures in September last year, intending to accelerate
growth and boost shareholder value. The plan included splitting
McGraw-Hill into two independent entities, McGraw-Hill Financial
and McGraw-Hill Education.
In the recent filing, the company provided complete future plans
for its new McGraw-Hill Education Company. Per the filing,
shareholders of the company will receive one share of the new
education company for every three shares held by them.
The filing also detailed that McGraw-Hill Education will reflect
$2.4 billion in assets along with $600 million in debt. In
connection with the financing plans for the split, the company
plans to issue senior notes worth $400 million. The company also
will enter into borrowing arrangements including $200 million term
loan and $350 million revolving credit facility. The company will
also pay $500 million to McGraw-Hill through dividend.
Through its growth and value plan the company's primary strategy
is to create two "focused companies" with optimal-size capital and
cost arrangement for enhancing client commitment while increasing
management's focus and responsibility. Further, management believes
the split will provide each of the independent companies with some
synergies and benefits.
McGraw-Hill Education, which represents 34% of 2011 total
revenue of the combined company, consists of two operating groups -
the School Education Group (SEG) serving the elementary, and
elementary high school (el-hi) markets and the Higher Education,
Professional and International (HPI) Group serving the college,
professional, international, and adult education markets.
The Education segment reported an operating loss of $65 million
during the last reported quarter, reflecting an improvement of 13%
over an operating loss of $75 million delivered in the prior-year
Going forward, McGraw-Hill Education will now focus on education
services and digital learning and will speed up growth strategies
while supplementing its growth through digital services and
Citing a business model shift, McGraw-Hill slashed approximately
10% or 550 jobs at its education division, including 20% job cuts
among its executive ranks. The company plans to develop its
education division more into a subscription-based model through
capitalizing on growth opportunities and developing education
services as well as digital products and solutions.
Currently, we have a long-term 'Neutral' rating on McGraw-Hill,
which competes with
MCGRAW-HILL COS (MHP): Free Stock Analysis
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