After pressure by shareholders in the past year The McGraw-Hill Companies (NYSE:MHP), , the longtime business and education publisher, decided to split into two publicly-traded companies. One of the companies will be called McGraw-Hill Markets, which will feature business and financial publisher Standard & Poor's, while the other company, to be called McGraw-Hill Education, will emphasize education and textbook publishing. (For more check out What Are Corporate Actions?)

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More on the Split
A part of the specialized business and educational publishing field populated by such companies as John Wiley & Sons (NYSE:JW.A), Pearson Plc (NYSE:PSO), Thomson Reuters (NYSE:TRI) and Scholastic (Nasdaq:SCHL), McGraw-Hill will enter a new era as two companies. McGraw-Hill education will include not only its traditional textbook publishing, but the growing digital business. McGraw-Hill markets will include S&P as well as JD Power and Associates.

Since 2006, the stock has been down more than 40%. The company, which forecasts revenue of around $2.4 billion for this year, was pressured by activist investors Jana Partners LLC along with the Ontario Teachers' Pension Plan. Nearly 90% of the company's second quarter $358.8 million operating income was from McGraw's financial units, including S&P. The activist investor groups, which hold around 5% of McGraw-Hill's shares, wanted the company split into four divisions and will review the proposed split. The company will also step up its share repurchase plan, which has already bought back more than $500 million worth of shares and is slated to eventually buy $1 billion worth this year. It also intends to reduce costs.

A Rich History
McGraw-Hill has a rich history, which reaches back into 1909 when James McGraw and John Hill combined their book businesses and named it McGraw-Hill Books. McGraw had started his company in 1899 while John Hill's began in 1902. The company became McGraw-Hill Publishing in 1916, then grew and expanded well beyond its original book business. The company started Business Week magazine in 1929 and by 1966 bought Standard & Poor's. While the company has had a long history of success, it's had some bumps and controversy, too. Fast forward to 2011, when S&P famously downgraded U.S. debt and the Justice Department investigated S&P ratings on subprime mortgages.

A Difficult Industry
Business and educational publishing can be a difficult business. Trends for print book, newspaper and magazine publishers have faced the well-known challenge of reader migration to digital, but the big names in the sector are still doing well. John Wiley & Sons' recent earnings showed a net profit margin of 9.9%, similar to Pearson's. Wiley's operating margin of more than 14% was impressive, especially when you consider Scholastic's was in the 5% range. Scholarly, medical and corporate were strong for Wiley. With admittedly a different product mix and segments, McGraw-Hill's operating margin for its last quarter was 22.7%, up from 22.1% in its year-ago quarter.

The Bottom Line
The investor groups which forced McGraw-Hill's split (or at least pushed the company into action it might have otherwise taken much more slowly) shows how deep the dissatisfaction runs with shareholders. McGraw-Hill's numbers also shows its heavy dependency on its S&P results. S&P has been the center of controversy lately with its ratings agencies, so its premier brand might be a bit bruised. Some wanted the company to go further, to break it up and sell the divisions instead, with estimates that its pieces would return as much as 40% more than current value. (To learn more about the S&P, read The Biggest S&P Missteps.)

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