Textbook Giants Scrap Merger Under Antitrust Pressure

Cengage and McGraw-Hill, the No. 2 and 3 largest US college textbook companies, terminated their merger agreement on Monday under pressure from US and British antitrust enforcers.

Cengage said the deal, announced in May 2019, was scrapped “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.” McGraw-Hill simply said closing conditions could not be satisfied.

The deal, which would have created a company worth about $5 billion, came at a time when college textbook prices were stable or declining slightly after two decades of rising sharply, according to US government data. McGraw-Hill is owned by Apollo Global Management.

Cengage and McGraw-Hill are behind Pearson, the world’s biggest education company, in market share.

A source familiar with the transaction said the Justice Department had demanded “significant divestitures of several dozen courses” to address antitrust concerns.

Britain’s antitrust enforcers, the Competition & Markets Authority, said in a statement that the companies had offered divestitures that were “unlikely to be sufficient in addressing its competition concerns.”

“The COVID-19 crisis has accelerated the need for students to learn wherever they are,” Cengage CEO Michael Hansen said. “On a standalone basis, Cengage is very well-positioned to continue to support the transition to digital.”

Full Content: St Louis Post-Dispatch

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