Boston-based Cengage to merge with rival publisher McGraw-Hill
Textbook publishing giants Cengage and McGraw-Hill are entering a new chapter as they switch from rivals to merger partners in a deal that could have big consequences in Boston.
The two companies Wednesday unveiled their plan to join forces. They are roughly the same size, with combined revenue of nearly $3.2 billion in the 12 months that ended on March 31.
Cengage CEO Michael Hansen said that together the two companies employ about 9,000 people worldwide, with 4,000 from McGraw-Hill and 5,000 from Cengage.
The combined company will keep the more well-established McGraw Hill name, without the hyphen. Cengage was formed in 2007 as a spinoff from Thomson. Hansen will lead the company post-merger, while CEO Nana Banerjee will continue leading McGraw-Hill through the transition. The deal, which needs federal antitrust approval, is expected to close early next year.
Hansen traces some of the merger to Boston-based Cengage’s efforts to offer more affordable alternatives to college students, including its Cengage Unlimited digital subscription service, sort of like a Netflix for college texts.
“We made a major pivot in this industry,” Hansen said. “This merger gives us an amazing opportunity to extend that affordability drive.”
The deal comes as Cengage is planning to move into a new headquarters on the South Boston waterfront next month. Cengage has leased 118,000 square feet over five floors in a new office building on Pier 4, and will move there starting June 10, relocating from 20 Channel Center in Fort Point.
Cengage employs about 570 people in Boston, compared with 90 at New York-based McGraw-Hill. Hansen said Cengage has room to expand at Pier 4. He expects the local McGraw-Hill employees to eventually move there, although a final decision hasn’t been made.
Other questions that remain include where the combined company will be headquartered, and who will stick around in the executive ranks. The companies said that the leadership team will consist of managers from both companies.
The companies say they’ll cut about $300 million from their combined budgets over the next three years, implying job cuts are coming. But Hansen said he hopes to use the merger as a springboard to grow the Boston workforce, in part because of the amount of talent in his industry here.
“Boston is going to continue to be a very significant location for us,” Hansen said. “We will try to consolidate people in one building, so people are working together, but we are expecting to, frankly, grow in Boston.”
Both publishers are owned by private equity firms today. The ownerships of Cengage and McGraw-Hill will each take 50 percent stakes in the combined business. Apollo Global Management owns McGraw-Hill, while Cengage is owned by a group that includes KKR, Apax Partners, and Searchlight Capital.