Private-equity giant Apollo Global Management is reportedly in exclusive talks to scoop up McGraw-Hill’s (MHP) education division in a transaction that could be valued at as much as $2.5 billion.
According to The Wall Street Journal, the $2.5 billion price tag would be significantly below the $3 billion to $4 billion McGraw-Hill hoped the unit would fetch due to gloomier financial projections the parent company sent out to prospective bidders.
Apollo appears to have beaten out rival private-equity firm Apax Partners in the bidding process for the education business, though the latter firm could still re-enter the process, the paper said. Apax is the majority owner of college textbook publisher Cengage Learning.
McGraw-Hill’s education business generated $836 million in third-quarter revenue, representing an 11% year-over-year decline amid difficulties in the K-12 market and the struggling global economy.
New York-based McGraw-Hill unveiled plans to separate its education unit from its financial business, which is headlined by Standard & Poor’s, back in September 2011. While McGraw-Hill initially eyed a spinoff of the education business, it also sought potential buyers.
Shares of McGraw-Hill were inactive Wednesday morning but have rallied about 17% so far in 2012 and 22% over the past 12 months.