Domestic, Investors, Required, University & College - Written by on Tuesday, August 2, 2011 20:48 - 0 Comments

Hedge Fund Jana Partners grabs a stake in McGraw Hill

photo: Reuters/Eric Thayer

by Paul Glader

The smart folks over at Dealbook posted this piece on activist investors taking a stake in education publisher McGraw-Hill. Hedge Fund Jana Partners and a Canadian pension plan announced a combined 5.2% stake in McGraw-Hill. It owns Standard & Poor’s ratings agency, which could be producing a bulk of the growth. But some suggest its book publishing business is lagging. Dealbook’s AZAM AHMED writes:

With a market value of about $12.5 billion, McGraw-Hill is the biggest target of activist investors so far this year, according to data from FactSet Research. And with its rich history of publishing educational books that touch students from kindergarten to professional education, it may also be the best known. Although Harold W. McGraw III, the company’s chairman and chief executive, owns less than 4 percent of the company, McGraw-Hill has long been seen as a family business.

He continues:

According to the filing, Jana has already held discussions with the company about its “business, corporate structure, operations, management and board composition, strategy and future plans.” The filing adds that the hedge fund “expects to continue to have such discussions” and “may take other steps seeking to bring about changes to increase shareholder value.”

Jana now holds a 2.9 percent stake, while the Ontario teachers’ plan owns 2.3 percent of McGraw Hill. Some believe a break up of McGraw Hill could be in the cards. Splitting the finance division (which includes Standard and Poor’s) and the education division is one option. Goldman Sachs analysts last month wrote that McGraw Hill is 20% undervalued to peers, noting that the sum of McGraw-Hill’s parts is more valuable than the company’s total market value.

In June, McGraw-Hill put its TV stations up for sale as a way to generate shareholder value. It sold it’s BusinessWeek magazine to Bloomberg for $5 million in late 2009. But it still owns J.D. Power and Platts. It’s stock price has risen 13% this year to $41 on Monday but is below its peak of nearly $71 in 2007. Meanwhile, says it is:

… “conducting a comprehensive portfolio review, which includes reevaluating its strategic core to ensure it is appropriately allocating capital to generate shareholder value. This process began in the second half of last year with the creation of McGraw-Hill Financial and is expected to continue with additional significant actions in 2011. This process is designed to unlock superior shareholder value and accelerate global growth.”

Jana is known as a corporate raider at times. Barry Rosenstein founded the firm in 2001 and has taken on more than 40 companies. For example, it waged a public battle with CNet Networks to replace its board in 2008. Instead, CNet was purchased by CBS.

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