(By Balachander) McGraw-Hill Companies Inc. (NYSE: MHP) has agreed to sell its education business to Apollo Global Management LLC for $2.5 billion.
Under the terms of the deal, McGraw-Hill will receive $250 million in senior unsecured notes issued by the purchaser at an annual interest rate of 8.5 percent.
The information services provider said it will use the estimated proceeds of roughly $1.9 billion from the sale to sustain its share repurchase program and to make selective tuck-in acquisitions.
Following the sale, the company anticipates a non-cash impairment charge of around $450 to $550 million relating to the School Education Group in the fourth quarter.
"This move builds on McGraw-Hill's strong legacy and gives us an unprecedented opportunity to focus on accelerating the growth of our iconic brands and leading franchises such as Standard & Poor's, S&P Dow Jones Indices, S&P Capital IQ, Platts and J.D. Power and Associates," said McGraw-Hill CEO Harold McGraw.
Upon completion of the deal, McGraw-Hill, which will be renamed McGraw Hill Financial, will be a high-growth, high-margin benchmarks, content and analytics company in the global capital and commodities markets.
"We were able to secure an attractive outcome and create additional balance sheet flexibility for McGraw Hill Financial," said McGraw.
The sale is expected to be completed in late 2012 or early 2013.
MHP shares, which have been trading in the 52-week range of $40.50 to $56.75, rose 2.74 percent to trade at $53.10 on Monday.