McGraw-Hill, agreeing to investor demands, said on Monday it will divide itself into a markets data company that includes its Standard & Poor's ratings businesses and an education company for textbook publishing.

The breakup of the mini-conglomerate follows public demands starting in July from the Ontario Teacher's Pension Fund and hedge fund Jana Partners for a broad reorganization.

The activists suggested breaking up the company into more than two pieces to highlight the value of its individual equities, commodities and financial analytics units.

"It's a first step," said Pat English, chief executive of Fiduciary Management, a large holder of McGraw-Hill shares, who argues for a more radical plan.

"It doesn't make sense to have S&P Credit Ratings, S&P Indices, Capital IQ, Platts and other information companies under one roof," English wrote in an e-mail.

Investors boosted McGraw-Hill's shares 3.98 per cent on Monday to close at $40.26 a share after it also said it will accelerate plans to complete $1 billion of share buybacks this year. The company has repurchased $541 million so far this year.

The stock, however, still trades far below the sum-of-the-parts estimates of more than $50 a share that several analysts forecast in July.

The move could hurt McGraw-Hill's credit-worthiness. Moody's Investors Service put its A3 rating on $1.2 billion of McGraw-Hill debt on review, saying it will look at the loss of business and customer diversity from the split.

"We intend to review the scope and impact of these steps," Jana and the Canadian pension fund said in a joint statement that noted they have identified additional ways "to unlock shareholder value."

Monday's announcement is a start to "reversing years of underperformance," they wrote.

Terry McGraw, the 63-year-old chairman and chief executive of the company founded by his great-grandfather, said he will lead the bigger and more profitable part of the reorganized company that will include the S&P credit rating, market index and Capital IQ corporate and markets analytics businesses.-Reuters