McGraw-Hill/Cengage merger creates major textbook competitor

The merger of education publishers McGraw-Hill and Cengage, announced yesterday (1st May), will create the sixth largest publisher in the world with a combined 2018 revenue of $3.22bn: $1.597bn for McGraw-Hill, $1.624bn for Cengage.

The new combined company - to be named McGraw Hill - will still be some way off the heft of textbook rival Pearson, which has revenue of $5.36bn (£4.13bn), but it will be a very significant competitor both in the US and UK markets. Pearson currently stands at number two in the top 10 chart, behind RELX (Elsevier and Lexis-Nexis) at $5.6bn (£4.156bn).

However UK industry commentators suggested the McGraw-Hill/Cengage merger says more about the challenges of the market in which the publishers operate rather than being a sign of strength. One, who preferred to speak anonymously, said: "It's not surprising given the difficulties of the US HE student market, which have impacted Pearson as well so heavily for the past few years.  None of the major publishers in the US really foresaw the imploding pressures on their market - textbook prices rose far too high when they seemed to have a captive audience, and student numbers were projected to keep on rising.  But those factors fell away in the face of textbook rental and online programmes, and a buoyant US economy which has stolen students away."

Cengage c.e.o. Michael Hansen, under whose leadership Cengage has launched its advanced, all-access textbook subscription venture Cengage Unlimited, will take the top position in the combined company. He said: “The new company will offer a broad range of best-in-class content – delivered through digital platforms at an affordable price. Together, we will usher in an era in which all students can afford the quality learning materials needed to succeed – regardless of their socioeconomic status or the institution they attend."

In the merger release, the companies underlined that they were committed to "continuing and growing their Inclusive Access and Unlimited programmes, with an opportunity to combine content and broaden the programme offerings on completion of the merger."

Pearson's share price fell on the London Stock Exchange, starting the day at 807.80 today (2nd May), after a start price of  821.768 at 8am yesterday.