Jana, Ontario teachers buy stake in McGraw-Hill

August 1, 2011 - 6:28 PM

NEW YORK (AP) — Activist hedge fund Jana Partners said Monday that it has teamed up with the Ontario Teachers Pension Plan Board to buy a 5.2 percent, $531 million stake in textbook publisher McGraw-Hill Cos., saying the shares were undervalued and that it may take steps to boost shareholder value.

Shares of McGraw-Hill jumped $2.34, or 5.7 percent, to $43.50 in after-hours trading on the news.

McGraw-Hill, which owns the financial ratings agency Standard & Poor's, educational publisher McGraw-Hill Education, Platts energy information services and J.D. Power and Associates, said last month it plans to divest its broadcasting unit as it reviews its portfolio of businesses.

Jana said in a securities filing Monday that it has already been in discussion with McGraw-Hill management about its business, strategy and future plans.

The hedge fund describes itself on its website as "a value oriented, event driven investment firm." The principals of the fund are Barry Rosenstein and Gary Claar.

Jana bought 8.9 million shares of McGraw-Hill between June 1 and July 28 at prices between $40.91 and $43.77 for a 2.9 percent stake. The Ontario teachers' fund bought 6.8 million shares between June 7 and June 17 between $39.61 and $41.69 for a 2.3 percent stake. Both said in filings they are consulting with each other and plan to act as a group.

Last week, McGraw-Hill said its second-quarter net income grew 11 percent to $211.1 million, or 68 cents per share, as revenue climbed 7 percent to $1.58 billion, exceeding the expectation of analysts surveyed by FactSet for 66 cents per share on $1.56 billion in revenue.

The company said strong revenue growth from its McGraw-Hill Financial segment, Standard & Poor's business and Information & Media's Business-to-Business Group helped offset a modest decline at McGraw-Hill Education. That unit was impacted by delays in orders and challenging comparisons to strength in the second-quarter of 2010.

For all of 2011, McGraw-Hill said it expects earnings to come in at the top range of its previously announced forecast; it has projected earnings of $2.79 to $2.89 per share.