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By Porter Anderson, Editor-in-Chief | @Porter_Anderson
‘To Unlock the Potential of Each Learner’
This morning (May 1), we have fresh word that Cengage Learning is in a “definitive agreement” to merge with McGraw-Hill in an all-stock arrangement on equal terms.As we reported on Tuesday, the industry-leading Cengage Unlimited full-access subscription model has been announced to have sold more than 1 million subscriptions since its introduction last August.
Michael E. Hansen, the CEO of Cengage, is to lead the company with McGraw-Hill CEO Nana Banerjee continuing to lead McGraw-Hill through the transition.
The companies are reporting that they expect the combined company to be named McGraw Hill, with details to be finalized prior to closing. The combined company’s leadership team is expected to comprise members of both McGraw-Hill’s and Cengage’s current structure, with announcements to come.
Based on the financial statements of Cengage and McGraw-Hill for the 12 months ending March 31, the combined company should have pro forma cash revenue of US$3,157 million and cash EBITDA less Prepub of $889 million including the pro forma impact of $300 million of cost synergies.
Regarding those cost synergies, the news material says, “The combined company will target cost synergies estimated at US$300 million over the next three years. This will unlock additional resources to increase value for students and educators by investing in areas such as adaptive learning, artificial intelligence, gamification, and model-based testing tools.”
The transaction is expected to close by early 2020, subject to customary closing conditions, including receipt of regulatory approvals.
Below is a video prepared for the informational landing page “Better Learning Together” created by Cengage and McGraw Hill about the two companies’ upcoming merger.
‘Digital Platforms, Affordable Price’
In its media messaging, Cengage reports that the transaction has unanimous approval by both companies’ boards of directors.
Hansen—you’ll find our Publishing Perspectives interview with him here—is quoted, saying, “The new company will offer a broad range of best-in-class content—delivered through digital platforms at an affordable price.
“Together, we will usher in an era in which all students can afford the quality learning materials needed to succeed, regardless of their socioeconomic status or the institution they attend.
“Additionally, the combined company will have robust financial strength to invest in next-generation products, technology and services that create superior experiences and value for millions of students.”
Speaking for McGraw-Hill, its president and CEO Nana Banerjee, says, “For more than a century, our goal has been to unlock the potential of each learner and improve lives through education.
“Combining our two companies and our complementary offerings will enable us to continue innovating.
“In this way we can continue to empower students and educators around the world with a wide choice of affordable, engaging course materials and advanced digital platforms to help them succeed throughout a lifetime of learning.”
Both companies have placed strong emphasis on lowering costs for students, one of the educational publishing industry’s greatest pain points.
And in an interesting reflection of the competitive nature of the educational publishing field, the offices of Ken Michaels, CEO of Macmillan Learning, has provided Publishing Perspectives with a comment, saying, “The higher ed market is currently undergoing a tremendous amount of change. As a family-owned and privately-held company, Macmillan Learning is a trusted brand that has long been focused on student achievement and affordability, and because of that we are well positioned to weather the change. We remain focused on what matters: helping each student achieve their fullest potential. We’re proud of our deep partnerships with educators, authors, and institutions, who we work alongside to create unparalleled learning experiences–which we recognize is a great and inspiring responsibility.”
McGraw-Hill reports that its initiatives to lower costs for American college students and increase student achievement—such as its Inclusive Access program, which provides college students with low-cost digital materials on the first day of class—saved students more than $55 million in 2018. “McGraw-Hill has partnerships with more than 14,000 authors and educators in numerous fields of study,” according to prepared news content.
As we reported Tuesday, Cengage Unlimited is said by the company to have saved students more than $60 million during the 2018-19 academic year alone. The subscription service offers unlimited access to more than 22,000 ebooks, online homework, access codes, and study guides, with low-cost print rentals available. A subscription also includes free access to Chegg Tutoring, Kaplan Test Prep, Quizlet, and Evernote’s note-taking app.
In terms of what’s expected from the merger, the combined company is anticipated to have:
- More than 44,000 titles from academics and experts, in a wide variety of subjects
- Benefits for PreK-12th grade educators with McGraw-Hill’s portfolio of literacy, math, science and humanities curricula, and adaptive technologies, with Cengage Advanced Placement offerings
Materials distributed to the news media about the Cengage-McGraw-Hill merger include this promotional graphic
More from Publishing Perspectives on Cengage is here. And more from our our Industry Notes series is here.