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Sept. 1, 2011, 12:01 a.m. EDT
By Jeff Reeves
ROCKVILLE, Md. "” Big-name spinoffs have been the rage in 2011. Most recently, we have been hit by news that Hewlett-Packard Co. /quotes/zigman/229301/quotes/nls/hpq HPQ -0.08% will spin off its PC business "” a headline that might have been overshadowed by the overall Dumpster fire that is HP these days.
And then there's the other smoking wreckage of a tech company, AOL Inc. /quotes/zigman/577531/quotes/nls/aol AOL +1.76% , which is supposedly meeting with a top M&A team to discuss how to sell the company for parts, according to reports last week.
But the Hewlett-Packard spinoff and the prospect of an AOL split are just the latest news bites. There is the recently unveiled Kraft Foods Inc. /quotes/zigman/279905/quotes/nls/kft KFT +0.89% plan to separate into two food companies. There was the split between Marathon Oil Corp. /quotes/zigman/292008/quotes/nls/mro MRO +1.58% and Marathon Petroleum Corp. /quotes/zigman/5611608/quotes/nls/mpc MPC +2.86% . And let's not forget that Motorola Mobility Holdings Inc. /quotes/zigman/3019788/quotes/nls/mmi MMI -0.11% was spun off just this January before catching the eye of Google Inc. /quotes/zigman/93888/quotes/nls/goog GOOG +0.05% as buyout bait.
So who will be spinning off operations next? Here are four big-name companies that could benefit from divvying up their businesses and find a warm reception to the new companies on Wall Street.
Publishing giant McGraw-Hill Cos. /quotes/zigman/233490/quotes/nls/mhp MHP -0.21% recently has been in the news because of its Standard & Poor's subsidiary downgrading U.S. debt from AAA to AA-plus. Perhaps some didn't even know that S&P is a division of the same company that publishes high school textbooks and J.D. Power consumer reports. But they should now. Read about 7 ugly truths about the $787 billion stimulus on InvestorPlace.com.
Aside from the obvious hullabaloo over the S&P downgrade creating headwinds for the corporate parent, it makes good sense for McGraw-Hill to spin off its financial and business services from its other publishing operations.
Strangely enough, its information and media unit is what's dragging down the valuation of the company "” despite some backlash in the wake of the credit downgrade. So a split perhaps would be better now than ever before.
A spinoff of S&P and McGraw-Hill's related services business would not only liberate the better-performing assets of its financial arm but also allow new management to find value in a publishing unit that still has a lot of potential.
Consider Bloomberg BusinessWeek. The magazine, under McGraw-Hill, lost $60 million in 2009 but reportedly will raise its paid circulation to 980,000 this year "” and enjoy 15% more paid ad pages. It still is not profitable, but president Paul Bascobert expects it to be soon.
This proves better management could meet the needs of the publishing businesses at McGraw-Hill if given the chance. Perhaps a dual approach to the businesses of McGraw-Hill could benefit both companies and result in bigger profits for each in the long run.
General Electric Co. /quotes/zigman/227468/quotes/nls/ge GE +1.18% is one of those corporate octopuses that touches a wide variety of businesses, organized under the disparate units GE Capital, GE Energy, GE Technology Infrastructure and GE Home & Business Solutions.
But don't think GE is only interested in hoarding assets and businesses. In 2009, it announced a deal to transfer a 51% controlling stake in the NBC Universal division to cable giant Comcast /quotes/zigman/89307/quotes/nls/cmcsa CMCSA +0.89% . And in 2004, GE completed the spinoff of most of its mortgage and life insurance assets into the independent Genworth Financial Inc. /quotes/zigman/340124/quotes/nls/gnw GNW +0.29% .
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