The Department of Justice was requiring divestitures that would have “made the merger uneconomical,” said Simon Allen, CEO of McGraw-Hill, in a statement. The company declined to elaborate on exactly what divestitures were being required to address DOJ’s antitrust concerns.
Cengage also cited “a prolonged regulatory review process and the inability to agree to a divestitures package” as the impetus behind its decision to drop merger plans, according to the company’s release.
The value of the planned merger was put at $5 billion, according to Reuters. When the proposed all-stock transaction was announced last year, the combined company would have had a pro forma cash revenue of $3.2 billion, according to the organizations.
The decision to terminate the agreement was unanimously approved by each company’s board of directors. No payment of a break fee by Cengage or McGraw-Hill is anticipated in that agreement.
McGraw-Hill, which is owned by Apollo Global Management, did not consider fallout from COVID-19 and school closures in its decisionmaking, according to an emailed response from the company
Cengage indicated that the crisis accelerated the need for students to learn wherever they are.
“On a standalone basis, Cengage is very well-positioned to continue to support the transition to digital and help students save significant money,” Cengage CEO Michael Hansen said in that company’s statement.
K-12 resources from Cengage and McGraw-Hill ranked in the top four in a recent EdWeek Market Brief analysis of curriculum providers that won state approval in 12 states. The ranking was based on state adoptions of educational resources.
In a separate McGraw-Hill announcement, Allen was officially named CEO today. He had been interim CEO of the company since October 2019.
Allen said the termination of the agreement “will allow each of us to focus on our respective stand-alone strategies for the benefit of our owners, employees, customers, and other stakeholders.”
He expressed appreciation for McGraw-Hill’s employees over the past year “and particularly in recent weeks as they have worked tirelessly to help educators make the transition to online learning.”
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