Publishing Giants Cengage and McGraw-Hill Announce A Merger

Two big giant textbook publishers, Cengage and McGraw-Hill plan to come together in an agreement that will create the 2nd largest provider of textbooks and other higher-education materials in USA.

The merger will be called McGraw-Hill and will be led by Cengage’s CEO, Michael Hansen. Previously known as McGraw Hill Education and Cengage Learning, both the companies are counting the all-stock deal as a rare merger of equals, that will help them in the new evolving market of digital books and online educational content.

The decision came as soft sales were observed in both the higher education and K-12 markets. According to initial estimates released by the Association of American Publishers this year, higher education sales fell 7.2% in 2018 compared to 2017, while K-12 sales dropped 4.6%.

It is expected that it will create a new company with approximately $3.16 billion in annual revenue, Cengage and McGraw-Hill’s chief executives said in an interview.

Close competition is anticipated as revenue is expected as close as $5 billion, trailing the roughly $8.5 billion market capitalization of the UK-based Pearson PLC, a major rival in the U.S. higher-education market.

With a drastic changing educational landscape in which low-cost alternatives are often available online, both the companies are still dependent on traditional print textbooks for half the income while the rest is from digital ebooks and class materials such as online homework assignments, and combining could help them make cost reductions.

The companies believed that their merger would yield $300 million of total cost savings over the next three years that they plan to utilize in the expansion of digital offerings and cheaper prices. “We want to make the experience much more affordable,” Mr. Hansen said in the interview, hushing up arguments as to why regulators should sign off on a union of the rivals. The new company’s leadership is likely to include executives from both firms which are both private equity-owned however McGraw-Hill CEO Nana Banerjee will leave after the transition.

Read More/Source: McGraw-Hill and Cengage Merge