McGraw-Hill sells education division

MCGRAW-HILL says it has reached a deal to sell its education arm to private equity firm Apollo Global Management for $US2.5 billion ($A2.4 billion) in cash and debt, as part of its plan to focus on its financial information businesses.

As part of the deal, McGraw-Hill will receive $US250 million in Apollo debt with an annual interest rate of 8.5 per cent. The acquisition includes the New York-based company's digital and traditional textbook business and other assets.

The sale is expected to close in late 2012 or early 2013. At that time, the New York-based McGraw-Hill Cos will be renamed McGraw Hill Financial.

Harold McGraw III, McGraw-Hill's current chairman, president and CEO, will head that company.

McGraw Hill Financial expects 2012 revenue of about $US4.4 billion. It plans to provide 2013 financial guidance when it announces its 2012 fourth quarter and year-end financial results.

Harold McGraw said the sale will boost value for the company's shareholders, give the company added financial flexibility and allow it to focus on growing brands such as Standard & Poor's, S&P Capital IQ, Platts and JD Power and Associates.

The company said it plans to use the proceeds from the sale, estimated at $US1.9 billion, to fund its stock buyback program, make acquisitions and pay off debt.

Starting in the fourth quarter, McGraw-Hill will classify the education business as discontinued operations. It expects to take a non-cash impairment charge in the fourth quarter of about $US450 million to $US550 million related to the division.

McGraw-Hill first announced plans to split into two companies in September last year through either the sale or spin-off of the education arm. Earlier this month, the company reported a 14 per cent drop in third-quarter net income, partially as a result of the planned split.

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