Private equity powerhouse Apollo Global Management (NYSE:APO) has reached a definitive agreement to purchase McGraw-Hill Education from McGraw-Hill Companies (NYSE:SPGI) for a total purchase price of $2.5 billion, McGraw-Hill announced today.
Going forward, the seller intends to rename itself McGraw-Hill Financial and focus on providing financial benchmarks data, analytics, and other content to financial professionals in the global capital and commodities markets. The company, which will retain brands including Standard & Poor's, S&P Dow Jones Indices, S&P Capital IQ, Platts, and J.D. Power and Associates, expects to end 2012 with approximately $4.4 billion in revenue.
The companies noted that "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%." Also, the final purchase price will depend in part on "certain closing adjustments," a term of art generally conditioning full payment on the acquired company reaching certain performance goals in the few years following acquisition. After taxes, McGraw-Hill expects to net $1.9 billion from the sale, which funds it will apply to share repurchases, debt repayment, and "selective tuck-in acquisitions."
Assuming regulatory hurdles are cleared, the transaction is scheduled to close later this year, or in early 2013.
Fool contributor Rich Smith has no positions in the stocks mentioned above. The Motley Fool owns shares of The McGraw-Hill Companies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.