By Jody Coultas, J.D.
"Required divestitures would have made the merger uneconomical," according to McGraw-Hill.
McGraw-Hill Education, Inc. and Cengage Learnings Holdings II, Inc. announced on May 4 that they have mutually agreed to terminate their proposed merger of equals. The decision was unanimously approved by the Boards of Directors of McGraw-Hill and Cengage. The Termination Agreement foresees no payment of a break fee on either side. The decision comes as the publishers apparently faced tough demands from the U.S. Department of Justice and the United Kingdom Competition and Markets (CMA) to win approval of the transaction.
Cengage and McGraw-Hill are both global publishers of educational products, such as textbooks and other supporting learning materials used in educational institutions, based in the United States. The publishing companies announced the proposed merger in May 2019, which would create the second-largest U.S. provider of textbooks and higher-education materials.
The New Zealand Commission had concluded that the proposed merger was unlikely to substantially lessen competition in any New Zealand market. However, the U.K. CMA and U.S. Department of Justice Antitrust Division were still reviewing the proposed combination, which faced opposition from the Open Markets Institute, the U.S. Public Interest Research Group, Economic Policy Institute, Institute for Local Self-Reliance, Open MIC (Open Media and Information Companies Initiative), Public Citizen, Public Knowledge, and three law professors.
The CMA issued a statement, saying that it was now closing its investigation.
"The decision to abandon this merger preserves competition in the market for textbook publishing, an important industry in the education sector," the Justice Department said in response to the company announcement. "Cengage and McGraw-Hill’s decision to abandon this merger also preserves innovation, as the two firms compete aggressively in the development of courseware technology."
Simon Allen, CEO of McGraw-Hill said: "Because the required divestitures would have made the merger uneconomical, McGraw-Hill and Cengage have decided to terminate the merger agreement. This will allow each of us to focus on our respective stand-alone strategies for the benefit of our owners, employees, customers and other stakeholders. I want to express my deep appreciation for the efforts and incredible commitment demonstrated by 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."
The decision by McGraw-Hill and Cengage to abandon their deal comes just days after Sabre Corporation and Farelogix, Inc. announced the termination of their merger agreement due to CMA opposition. Sabre had said that the CMA acted outside its jurisdiction in blocking the deal.
Companies: Cengage Learnings Holdings II, Inc.; McGraw-Hill Education, Inc.
MainStory: TopStory AcquisitionsMergers Antitrust GCNNews
Interested in submitting an article?
Submit your information to us today!Learn More
Antitrust Law Daily: Breaking legal news at your fingertips
Sign up today for your free trial to this daily reporting service created by attorneys, for attorneys. Stay up to date on antitrust legal matters with same-day coverage of breaking news, court decisions, legislation, and regulatory activity with easy access through email or mobile app.