McGraw-Hill to split into two listed companies

The investors — Jana Partners LLC,a hedge fund,and the Ontario Teacher’s Pension Fund — argued that breaking up the company would increase its value to shareholders.

A Jana spokesman did not immediately respond to a request for comment.

The company’s shares were up 2.6 per cent to $39.74 in premarket trade.

Terry McGraw,chairman and chief executive of the company and a great-grandson of the founder,will lead McGraw-Hill Markets,which will hold the Standard & Poor’s credit rating business,S&P’s market index business and S&P Capital IQ,which provides data and analytical tools on companies and markets.

The company said it has started a search for a new CEO for McGraw-Hill Education,which will contain the textbook publishing and education units. The current head of those businesses is Robert Bahash,66,a long-time chief financial officer of the corporation who stepped into his current post last year after the top education executive left.

The break-up,which will be structured as a tax-free spinoff of the education business to McGraw-Hill shareholders,is expected to be completed by the end of 2012,the company said in a statement.

The markets businesses will have about $4 billion of revenue in 2011,and the education businesses will have about $2.4 billion in revenue,it said.

McGraw-Hill said it will make significantly cut from $1 billion of current corporate expenses and administrative and technology costs.

Evercore and Goldman Sachs are advising on the spinoff.

The company said it would speed up share repurchases to a total of $1 billion in 2011. It said it has bought back $541 million of stock so far this year.