Bowing to shareholder pressure, McGraw-Hill (MHP) unveiled plans on Monday to split into two separate companies in an effort to unlock value and streamline its operations.

New York-based McGraw-Hill said one company will focus on its education business, while the other will zero in on the global markets.

At the same time, McGraw-Hill said it plans to conduct an extensive cost-cutting program aimed at slashing more than $1 billion of expenses.

McGraw-Hill said its management is still developing detailed separation plans, but it expects to complete a tax-free spinoff of the education business by the end of 2012.

The markets business will be known as McGraw-Hill Markets and include Standard & Poors, S&P Indices, S&P Capital IQ and Platts. This company is expected to post 2011 revenue of about $4 billion, with nearly 40% of it coming from international markets.

The other companies will be called McGraw-Hill Education and, with 2011 revenue of $2.4 billion, will be the second-largest education business in the world. McGraw-Hill said it is already searching for a CEO for this business.

The plan will transform a multifaceted corporation into two powerful companies, each with highly focused strategies, aligned customer bases and interconnected markets, CEO Terry McGraw III said in a statement. After thorough analysis, the Board determined that the creation of these two independent companies is the best and most reliable way to generate superior shareholder value.

McGraw-Hill is the latest company to break apart in an effort to unlock shareholder value, joining companies like ITT (ITT), Fortune Brands (FO), Sara Lee (SLE) and Kraft Foods (KFT).

Shareholders cheered the move, bidding McGraw-Hills stock 1.96% higher to $39.50. The companys shares have rallied more than 6% year-to-date.

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