US textbook publisher merger collapses, pleasing colleges

McGraw-Hill and Cengage abandon union after government demands heavy culling

May 5, 2020
woman reading in a bookshop
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Academic publishers McGraw-Hill and Cengage have abandoned their planned merger, cheering university groups that feared it would bring even higher textbook prices and slower moves toward digital alternatives.

The two US-based companies largely blamed their decision on heavy demands from the US Justice Department for a divestment of assets aimed at avoiding the concentration of assets that the universities had feared.

The failed union is especially welcome, said Peter McPherson, president of the Association of Public and Land-grant Universities, as higher education faces ever-growing pressures to translate technologies into more effective and less expensive ways of teaching.

“More providers in the marketplace will help ensure more students benefit from digital transformation,” Mr McPherson said in a statement.

McGraw-Hill and Cengage, with just over 20 per cent of the academic textbook market apiece, are the two largest companies after UK-based Pearson Education, which has more than 40 per cent.

They announced their merger agreement in May 2019, while acknowledging the possibility of tough Justice Department requirements to sell off a large number of titles and materials in courses where they have competing offerings.

Representatives of universities, students, campus bookstores and consumer advocacy groups quickly united in opposition to the merger, encouraging the department to take an aggressive position on consumer protection.

In its argument to the Justice Department, Mr McPherson’s group, the APLU, cited College Board data showing that US college students already pay an average of $1,240 (£995) a year on textbooks and supplies. Textbook prices alone have increased 184 per cent over the past two decades, triple the nation’s overall inflation rate, the APLU said.

At the same time, the APLU said, the higher education community has been slow to adopt new technologies. That may be partly because of educators wanting to be careful, the APLU acknowledged, but also reflects a textbook industry far less driven than in other sectors to embrace digital innovation.

McGraw-Hill and Cengage said their boards unanimously agreed to terminate their proposed merger. “The required divestitures would have made the merger uneconomical,” the chief executive officer of McGraw-Hill, Simon Allen, said in a statement.

Cengage, headquartered in Boston, emerged from federal bankruptcy protection in 2014. Its chief executive officer, Michael Hansen, said in a conference call with investors that the coronavirus pandemic created additional pressure to reconsider the merger and to concentrate more fully on helping colleges adjust to online instruction.

The proposed combined company had been promising an expansion of digital subscriptions in which students would get access to all 44,000 of their textbook titles for a single price.

Cengage said it made its existing digital subscription plan free for the rest of the school year, reporting that more than 290,000 students signed up.

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