McGraw-Hill agrees to split into 2 units

McGraw-Hill Cos. Inc., agreeing to investor demands to "unlock shareholder value," said Monday that it will divide itself into a markets-data company that includes its Standard & Poor's ratings businesses and a textbook-publishing firm.

The breakup follows public demands starting in July from the Ontario Teacher's Pension Fund and hedge fund Jana Partners LLC for a broad reorganization. The activists suggested breaking up the company into more than two pieces to highlight the value of its units.

"It's a first step," said Pat English, chief executive of Fiduciary Management Inc., a large holder of McGraw-Hill shares, who sought a more radical plan.

Investors boosted McGraw-Hill's shares 4 percent Monday to $40.26 a share after it also said it would accelerate plans to complete $1 billion of share buybacks this year. The company has repurchased $541 million so far in 2011.

The stock, however, still trades far below the sum-of-the-parts estimates of more than $50 a share.

Terry McGraw, 63, chairman and chief executive of the company founded by his great-grandfather, said he would lead the bigger and more profitable part of the reorganized company that will include the S&P credit rating, market index and Capital IQ corporate and markets analytics businesses.

The plan, which is expected to be put in place by the end of 2012, leaves several questions unanswered. McGraw said nothing about a succession plan and the company said it would start a search to find a CEO for McGraw-Hill Education. The textbook business is now run by Robert Bahash, 66, McGraw-Hill's former chief financial officer who stepped into the role when an executive left last year.