March 6, 2021

DealBook: Activist Investor Takes Stake in McGraw-Hill

McGraw-Hill, the storied textbook publisher, has a big new investor.

Jana Partners, an activist hedge fund, disclosed on Monday that it and the Ontario Teachers’ Pension Plan had taken a combined 5.2 percent stake in McGraw-Hill. According to the filing, Jana has already held discussions with the company about its “business, corporate structure, operations, management and board composition, strategy and future plans.”

The filing adds that the hedge fund “expects to continue to have such discussions” and ” may take other steps seeking to bring about changes to increase shareholder value.”

Shares of McGraw-Hill jumped 5 percent in after-hours trading.

The investment comes as McGraw-Hill has been exploring strategic alternatives for some parts of its business. The company sold off Business Week magazine to Bloomberg last year and in June announced that it was putting its television unit up for sale. After announcing second-quarter earnings last week, the company’s chief executive, Harold McGraw III, reiterated his plan to continue reviewing the company’s portfolio.

“There has been a strong response from financial and nonfinancial buyers to the announcement in June that we planned to divest our broadcasting group,” he said. “That divestiture is part of a continuing portfolio review across the company to re-evaluate our strategic core.”

The company’s publishing business has been struggling this year, in part because of a delay in textbook orders. The ratings agency Standard Poor’s, meanwhile, which is owned by McGraw Hill, has been posting double-digit growth and profit margins.

Activist investors typically buy up shares in a company hoping to unlock value by pressuring management or joining the board of directors to effect change. Styles range widely, from loud and highly public campaigns to more low-key, behind-the-scenes interaction with management.

While Jana has utilized both methods in the past, its history suggests a less aggressive approach than some hedge funds, like Pershing Square or activists like Carl C. Icahn. Founded in 2001 by Barry S. Rosenstein, Jana has engaged in more than 40 activist campaigns.

In late 2009, the hedge fund took a position in Dutch mail company TNT N.V., and worked quietly with the company and pressured it to break into two parts. In 2008, the hedge fund engaged in a public battle with CNET to replace the board of directors, but the company was acquired by CBS before elections could take place.

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