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Report: McGraw-Hill, CME consider index JV

by Lou Whiteman  |  Published September 30, 2011 at 11:02 AM
electronicticker227x128.jpgMcGraw-Hill Cos. and CME Group Inc. are reportedly in talks to combine their index businesses into a joint venture that could bring the iconic S&P 500 and Dow Jones industrial average under one roof.

The companies have held discussions for more than a year, according to the Wall Street Journal, and no deal is finalized. Under consideration is a scenario in which McGraw-Hill and CME would form a joint venture, with McGraw-Hill owning about a 75% stake and managing the venture and CME holding about 25%.

Chicago-based CME, the exchange giant created from the 2007 merger of the Chicago Mercantile Exchange and the Chicago Board of Trade, acquired a 90% stake in the Dow Jones indexes last year in a deal that valued the operation at about $675 million. New York-based Dow Jones & Co., which is owned by Rupert Murdoch's News Corp., retained a 10% holding in the business, which was combined with CME's market data services.

Dow Jones & Co. may keep a "minimal" stake in a combination with S&P, according to the Wall Street Journal report.

New York-based McGraw-Hill, under pressure from activists, announced earlier this month that it would split its ratings and index unit from its textbook publishing business to create two independent entities. In addition to the indexes the company owns Standard & Poor's credit rating business, J.D. Power and Associates and Capital IQ, among other assets.

The announcement came a month after Jana Partners LLC and Ontario Teachers' Pension Plan disclosed that they had acquired a combined 5.2% stake in McGraw-Hill with the intention of pushing for change. McGraw-Hill responded at the time that the company since 2010 had been in the process of seeking ways to unlock superior value, a process that apparently included discussions with CME.

Goldman, Sachs & Co. and an Evercore Partners Inc. are working with McGraw-Hill on its strategic review.

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Tags: CME Group Inc.S&P 500 | Dow Jones industrial average | M&A | McGraw-Hill Cos.

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