FT Alphaville broke the news on Monday night that Deven Sharma is to step down as president of S&P, following a review of McGraw-Hill’s strategic operations and only three weeks after its historic downgrade of the US sovereign credit rating.
We spoke with people familiar with the thinking of the company on Tuesday and asked them what this meant for the future of the rating agency and the rest of the McGraw-Hill empire, which is coming under increasing pressure to boost shareholder value from activist fund investors.
McGraw-Hill is understood to be planning to spin off its education business as part of “one of the things we’re looking at”. However, nothing has been decided formally yet — a decision is subject to an ongoing “strategic review” which will conclude in “a few months”.
Activist fund Jana Partners has proposed a quartering of the McGraw-Hill business, as reported by FT colleagues Dan McCrum, David Gelles and Helen Thomas. McGraw-Hill believes “everything is on the table” but is concerned about “cost dysenergies”, which is a made-up word way of referring to reducing returns to scale.
The metaphorical table, though, does not include S&P. “Point blank no, ” was the response to whether it was considering spinning off the ratings business. Confidence was expressed that “legal things and all that… are going away” and that the rating agency represented a key growth business in an age when local bond markets are developing across the world.
The timing of Sharma’s departure was “absolutely not” related to S&P’s downgrade of the US sovereign’s credit rating, McGraw-Hill CEO Terry McGraw told the FT on Monday.
The decision had been in the works for months, according to the people familiar with the firm’s thinking.
So was it just a case of unfortunate, coincident timing? Probably — it’s hard to line up Citigroup’s COO as a replacement at short notice. But it may well be helpful to give Washington a new messenger to shoot over the next few months.
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Exclusive: Deven Sharma to step down as S&P President – FT Alphaville