In McGraw Hill’s earnings release, the company said the sale of BusinessWeek will be worth $9.3 million pre-tax and $5.9 million after-tax, giving the company a $0.02 gain per share in the next quarter.
The early reporting coming out of BusinessWeek on the transaction said the price was $2 million-$5 million in cash, with the assumption of liabilities. We’re not sure how that translates into $9.3 million pre-tax, but we’ll listen to the call to see if they add any more colour.
In the release, McGraw Hill noted ad pages in BusinessWeek fell 29.3% during the quarter.
Overall, the quarter was less than stellar. EPS of $1.07, was basically in line with estimates of $1.05. Revenue was $1.88 billion, missing estimates of $1.94 billion. Both of those were down year over year.
From the call, here’s some more colour on the deal:
Now I’d like to update you on the pending divestiture of BusinessWeek. On October 13 we signed an agreement to sell BusinessWeek to Bloomberg. We will receive $5 million in cash and Bloomberg will assume certain liabilities including our unfulfilled subscription liabilities. The transaction is expected to close in the fourth quarter of this year. We will recognise a $9.3 million pre-tax or $5.9 million post-tax gain or approximately $0.02 per diluted share. Given the timing of the transaction we expect minimal financial impact in 2009 from operations.
In 2010 the divestiture will reduce year over year revenue growth by approximately $100 million. We expect to realise savings next year of approximately $20 to $25 million pre-tax or $0.04 to $0.05 per diluted share. This is net of the portion of allocated expenses such as shared services and rent that will no longer be absorbed. Savings could vary depending upon the length of the transition services with Bloomberg as well as the ability to consolidate or sub-lease space.
The divestiture will reduce our dependence on advertising revenue. Following the divestiture of BusinessWeek advertising will represent about 2% of pro-forma total revenue versus approximately 4% previously.