McGraw-Hill, Cengage Jointly Agree to Terminate Planned Merger

(Bloomberg) -- McGraw-Hill and Cengage Learning Holdings II Inc. terminated their planned merger, which would have created the second-largest provider of college textbooks and other higher-education materials.

The all-stock deal, announced in May 2019, was meant to form a company with about $3.2 billion in annual revenue, but McGraw-Hill Chief Executive Officer Simon Allen said in a statement Monday that divestitures sought by the government made the combination uneconomical.

The scuttled deal would have created a more robust competitor for industry leader Pearson Plc. The new company would have been in a position to pressure prices in Pearson’s key U.S. higher-education publishing market, analysts at Liberum said in a note when the merger was announced.

Boston-based Cengage, which emerged from Chapter 11 bankruptcy protection in 2014, is controlled by private equity firms including Apax Partners, KKR & Co. and Searchlight Capital Partners. Its over-the-counter shares last traded in February at a market capitalization of about $785 million, a deep slide from the $7.75 billion Cengage fetched when what’s now Thomson Reuters Corp. sold it to Apax and Omers Capital Partners in 2007.

New York-based McGraw-Hill is controlled by Apollo Global Management, which bought it for $2.5 billion from the former McGraw-Hill Cos. in 2012. The remaining financial business of that company is now S&P Global Inc.

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