Cengage Announces a Termination of Its McGraw-Hill Merger Agreement

In News by Porter Anderson

The two major educational publishers announced an all-stock merger a year ago, but ran into regulatory issues and criticism around market dominance and pricing.

Image – iStockphoto: Gaudi Lab

By Porter Anderson, Editor-in-Chief | @Porter_Anderson

Cengage’s Hansen: ‘We Are Disappointed’
In a release issued this morning (May 4), Cengage has announced that its merger agreement with McGraw-Hill “has been terminated by mutual agreement due to a prolonged regulatory review process and the inability to agree to a divestitures package with the US Department of Justice.”

Michael E. Hansen, the company’s CEO, is quoted in the statement from Boston, saying, “Cengage entered into the merger agreement as a leader in helping students access affordable course materials and digital courseware.

“Although we are disappointed that we were unable to finalize the merger, the opportunity ahead remains significant.”

The announcement comes one year after the May 1 news last year that Hansen would lead a merged Cengage-McGraw Hill company, at the time forecasting a pro forma cash revenue level of US$3.2 million. It was anticipated in May 2019 that the deal would close by early this year.

By February of this year, Lindsay McKenzie at Inside Higher Ed was writing of stiff headwinds against “opposition from consumer advocacy groups, students, and even college bookstores.”

“Opponents to the merger,” she wrote, “worry that the new mega-publisher, to be called McGraw Hill, will significantly reduce competition in the textbook market and enable the company to drive up prices. The publishers strongly refute this, saying the merger will enable them to pass on savings to students and make their products more affordable.”

The two parties had moved the deal’s deadline to Friday (May 1) from February. And while another extension, to August 1, was seen as possible, the companies have today concluded the effort. Some of the hurdles are reported but not confirmed to have included regulatory demands for large divestitures of competitive content held by the companies, some of that content proprietary to various digital platforms and tools–some of which are quite central to Cengage’s operation, in particular.

At the time of the merger announcement in 2019, the combined company was 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

Michael Hansen

In today’s commentary, Hansen says, “The COVID-19 crisis has accelerated the need for students to learn wherever they are. On a standalone basis, Cengage is very well-positioned to continue to support the transition to digital and help students save significant money.

“Looking ahead, faculty and administrators everywhere will be moving their classes online—and we are now singularly focused on ensuring the Cengage Unlimited subscription and our leading digital course-ware platforms continue to deliver value for students and faculty.”

Under the terms of the merger agreement, Cengage’s announcement says, neither Cengage nor McGraw-Hill will be responsible for any payments to the other party as a result of the termination of the merger agreement.

More from Publishing Perspectives on Cengage is here. And more from our Industry Notes series is here.

About the Author

Porter Anderson

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Porter Anderson has been named International Trade Press Journalist of the Year in London Book Fair's International Excellence Awards. He is Editor-in-Chief of Publishing Perspectives. He formerly was Associate Editor for The FutureBook at London's The Bookseller. Anderson was for more than a decade a senior producer and anchor with CNN.com, CNN International, and CNN USA. As an arts critic (Fellow, National Critics Institute), he was with The Village Voice, the Dallas Times Herald, and the Tampa Tribune, now the Tampa Bay Times. He co-founded The Hot Sheet, a newsletter for authors, which now is owned and operated by Jane Friedman.