Information services provider The McGraw-Hill Companies, US, has signed a definitive agreement to sell its McGraw-Hill Education business to investment funds affiliated with Apollo Global Management, LLC, for a purchase price of $2.5 billion, subject to certain closing adjustments. As part of this transaction, McGraw-Hill will receive $250 million in senior unsecured notes issued by the purchaser at an annual interest rate of 8.5 percent. The transaction, which is expected to close in late 2012 or early 2013, is subject to regulatory approval and customary closing conditions.
Upon closing, McGraw-Hill, which will be renamed McGraw Hill Financial (subject to shareholder approval), will be a high-growth, high-margin benchmarks, content and analytics company in the global capital and commodities markets. With customers in more than 150 countries, McGraw Hill Financial expects 2012 revenue of about $4.4 billion with nearly 40 percent from international markets. The Company will provide 2013 financial guidance for McGraw Hill Financial when it announces its 2012 fourth quarter and year-end financial results.
Upon closing of the transaction, McGraw Hill Financial will have considerable balance sheet flexibility. The Company will use the estimated proceeds of about $1.9 billion, net of tax and certain closing adjustments, from this sale to sustain its share repurchase programme, to make selective tuck-in acquisitions that enhance McGraw Hill Financial's portfolio of powerful brands, and to pay off any short-term borrowing obligations.
Beginning in the fourth quarter of 2012, the Company will classify and report results of McGraw-Hill Education as discontinued operations. As a result of this transaction, the Company anticipates a non-cash impairment charge in the fourth quarter of about $450 to $550 million relating to the School Education Group.
The McGraw-Hill Companies announced in September 2011 it would separate into two industry-leading companies following a year-long strategic portfolio review. This decision was a key driver of the Company's Growth and Value Plan, which also included a commitment to generate $100 million in cost savings and a significant share repurchase programme. On November 2, 2012, the Company provided an update of its progress on these initiatives and will do so again when it announces its 2012 fourth quarter and year-end results.
