Based on its growth and value plan, The McGraw-Hill Companies Inc. (MHP) recently announced that it has completed the sale of its Broadcasting group to The E. W. Scripps Company (SSP) for $212 million.
The divesture is part of the company’s attempt to restructure its portfolio of businesses and concentrate more on global brands, thereby enhancing shareholder value through proper capital allocation.
The Broadcasting Group generated revenues of approximately $100 million in fiscal 2010, up 18% from the prior year. It operates nine television stations (four ABC affiliates and five Azteca America affiliated stations).
Last December, the company updated its growth and value plan and announced several strategic measures to reduce cost while boosting its shareholders value
McGraw-Hill through its value plan will split into two independent entities, McGraw-Hill Financial and McGraw-Hill Education with optimal-size capital and cost arrangement for amplifying client commitment while improving strategic and economic flexibility.
McGraw-Hill Financial will focus on capital and commodities markets and will include the iconic brands like S&P Ratings, S&P Capital IQ, S&P Indices, Platts and Commercial Markets.
Moreover, McGraw-Hill’s Education division will focus on education services and digital learning while speeding up and supplementing its growth through digital services and buyouts.
In addition, the company will focus on abridging costs drastically to ensure competent operating channels. Moreover, McGraw-Hill intends to save approximately $100 million through cost reduction programs.
McGraw-Hill announced to reduce approximately 10% or 550 jobs at its education division, including 20% job cuts in its executive ranks. The company plans to develop its education division more into a subscription-based model through capitalizing on growth opportunities and developing education services and digital products and solutions.
Moreover, to restrict its future liabilities and better forecast its costs related to retirement plan, McGraw-Hill will be altering its pension program to bring its retirement program at par with market practice. The company will freeze its defined-benefit pension plan as of April 1, 2012.
McGraw-Hill added that the above moves will generate approximately $50 million in annual cost savings, which will supplement the company to surpass its announced cost savings of $100 million.
The McGraw-Hill Companies is a diversified publisher and provider of financial information, offering media services to customers in over 40 countries.
Currently, McGraw-Hill retains a Zacks #2 Rank, which translates into a short-term ‘Buy’ rating. Also, considering the company’s fundamentals, we have a long-term ‘Neutral’ recommendation.
