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Subject to certain customary closing conditions and regulatory approvals, the transaction is slated to close later this year or in early 2013.
The New York-based publishing company and owner of the Standard & Poor’s ratings firm, which reported stronger-than-expected quarterly earnings earlier this month and raised its fiscal 2012 outlook, has been looking to split into two separate publicly-traded companies.
McGraw-Hill CEO Harold McGraw III said the sale gives it an “unprecedented opportunity” to focus on accelerating the growth of its remaining brands such as Standard & Poor’s, Platts and J.D. Power and Associates.
The long-term vision included the spin-off of its struggling education business, which posted an 11% decline in sales to $836 million last quarter amid a weak K-12 market. The business, though, cut expenses by 9% last period and saw weak sales buoyed by strong digital sales.
“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," McGraw said.
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McGraw-Hill, which first announced its divestment plans in September 2011, had planned to make a definitive decision about the education business by the end of this month.
"McGraw-Hill Education is a leader in digital learning with world-class content and enormously talented and committed employees,” McGraw said. “I look forward to seeing their continued success with the expertise and support of Apollo.”
Upon closing, McGraw-Hill will be renamed McGraw Hill Financial and will have customers in more than 150 countries. It forecasts 2012 revenue of $4.4 billion, with nearly 40% coming from international markets.
McGraw-Hill said it will use approximately $1.9 billion of the after-tax proceeds to undergo a stock buyback program, and may also make selective “tuck-in acquisitions” to enhance the finance business’s portfolio.
The company will take a non-cash impairment charge in the fourth quarter of $450 million to $550 million related to the school education group.
Shares of McGraw-Hill climbed more than 2.4% to $52.88 in recent trade.