A merger between McGraw-Hill Education and Cengage Learning Holding
Announced in May, the proposed merger of two textbook publishers, Cengage Learning Holdings II Inc and McGraw- Hill Education Inc would reduce the number of textbook publishers. Currently, Apollo Global Management LLC owns McGraw-Hill. The merger would result in decreasing the number of players from four to three.
As planned, if the two top college textbook companies combine together, the cost of U.S college education could get more expensive. And if they succeed in joining hands, it could directly affect the other competitors in the market, especially those who are selling the used books.
According to the sources, the sum of both the companies’ shares in the market is approximately 30%. According to other reports, Pearson is the market leader with 40% of the market revenue and right behind them are Cengage with 22% and McGraw at 21% of market share revenue while Wiley that stands behind these three companies generates 7% market revenue.
The merger threatens to consolidate more power in the grasp of a handful of publishers`
A consumer advocacy group named U.S. PIRG Education Fund is going to write a letter to the justice department with an urge to stop the deal along with Open market, a group of consumer advocates.
The letter signed by PIRG and some three dozen leaders of university student organization said, “The merger threatens to consolidate more power in the grasp of a handful of publishers, who have used their enormous market share to drive up prices for consumers over the course of the past few decades.”
A spokesperson for the two companies said, “They are closely working with the justice of the department.” Further, he added, “The companies remain confident that the transaction will benefit our customers.”
According to the published data, after almost two decades in the price rise of the textbook at twice the rate of inflation, the deal is coming at the time when the college textbook prices are slowing decreasing or becoming stable. This deal is going to generate capital equal to creating a company worth about $5 billion.
The aim of the companies is to keep the prices down of the textbooks
The ultimate aim of the merger between both companies is to keep the prices down. One of the options they said might be to put McGraw-Hill products onto Cengage Unlimited which costs $179 annually and gives students access to all Cengage digital products. It has not disclosed if that price will change.
The companies said they are expecting to close the deal by early 2020. Both the companies are also interested in exploring the digital options as they are cheaper as compared to the paperback versions and cannot be resold.