As Washington watched Standard & Poor’s this week, anxious to see how the credit rating agency would respond to politicians’ 11th-hour deal-making on the US debt ceiling, its parent company was making other headlines.
Jana Partners, an activist investor, announced its presence on McGraw-Hill’s shareholder register, saying it was joining forces with the Ontario Teachers Pension Plan Board to press for change. Between them, they control 5.2 per cent of the stock, slightly more than Terry McGraw, the group’s chairman.
McGraw-Hill quickly responded by reminding investors that, at its last earnings announcement just a week earlier, it had promised “significant action” on its portfolio and its cost structure, while stepping up shareholder returns with an expanded share buy-back programme.
Analysts rushed for their sum-of-the parts valuation models, predicting that a media conglomerate that had acquired a reputation for conservatism would now countenance far more radical moves. With assets ranging from Capital IQ financial data to business media brands such as Aviation Week, JD Power and Platts, most now expect substantial disposals or spin-offs.
Mr McGraw has not yet shown his hand, but several analysts argued that he could create value by spinning off the education business, which competes with Pearson, the owner of the Financial Times, in publishing textbooks and digital education materials.
Such hopes lifted the stock at first. As S&P analysts digested the latest news on the economy, however, that boost was evaporating by the end of the week.