With Textbook Lawsuit Dismissed, Platinum Equity Inks $4.5B Deal to Buy McGraw Hill

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Publisher McGraw Hill will soon pass from one private-equity firm to another.

Platinum Equity announced an agreement this week to buy the company from Apollo Global Management, in a deal valued at about $4.5 billion, including debt, reports the Wall Street Journal.

McGraw Hill CEO Simon Allen will continue to lead the business, according to a statement released by the company.

The acquisition comes about a year after McGraw Hill terminated its efforts to merge with fellow publisher Cengage. That deal, which would have created the second largest U.S. textbook publisher, fell through after being subjected to a regulatory review process with the U.S. Department of Justice.

Founded in 1888, McGraw Hill has a long history in print. But the acquisition announcement signals that the company’s new owners envision a digital future for the brand. McGraw Hill reports that its digital products generate more than $1 billion annually, accounting for 60 percent of its revenue and more than 80 percent of its higher ed business.

Pros and Cons of Private Equity Ownership

Private equity firms have been gobbling up edtech companies (and newspapers), to the dismay of some observers, employees and customers, who worry about the possible downsides of a “consistent focus on monetization and shareholder value,” as market analyst Phil Hill has written.

The effects that private equity deals like McGraw Hill’s will have on textbook users and college bookstores depend on whether firms are looking to make a lot of money in a quick sale or are interested in the steady financial returns more common to the publishing industry, says Richard Hershman, vice president of government relations for the National Association of College Stores.

“The pressure on the publishers to streamline has definitely impacted customer services for institutions of higher education,” Hershman told EdSurge. “On the other hand, private equity firms bring in a lot of money they can invest in the companies, which can help support innovation.”

Neither education nor publishing are well represented among Platinum’s portfolio of about 40 companies—although it does own yearbook and class-ring company Jostens. The firm, based in Beverly Hills and led by founder and CEO Tom Gores, reports more than $25 billion in assets. Its other recent deals include buying a controlling stake in the manufacturer of Singer sewing machines, acquiring environmental management company Urbaser Group and buying mobile gaming platform Game Taco.

McGraw Hill’s current owner, Apollo Global Management, recently experienced a leadership shift. Former CEO and chairman Leon Black stepped down this spring, citing health reasons, after it was revealed that he had financial ties to financier Jeffrey Epstein, who died in jail while facing federal sex trafficking charges.

‘Inclusive Access’ Lawsuit Dismissed

The deal is not the only news about McGraw Hill to break this week.

On Monday, a judge dismissed antitrust lawsuits accusing the company, plus several other large publishers and big bookstore chains, of conspiring to raise prices on textbooks through the subscription deals they strike with colleges, Reuters reports.

Called “inclusive access” by the industry, the practice prompts students to pay for access codes to digital copies of bundled course materials. Colleges, retailers and publishers are legally required to allow students to opt out of these subscriptions. But as EdSurge reported last year, the lawsuits alleged that opt-out processes are “opaque, confusing and difficult if not impossible to execute,” and that publishers and retailers sometimes discourage students from opting out.

The claims were consolidated after being filed by students, independent bookstores and online textbook sellers against McGraw Hill, Barnes & Noble, Follett Higher Education Group, Cengage Learning, and Pearson Education.

In rejecting the claims, U.S. District Judge Denise Cote determined there was no conspiracy to suppress competition, and that independent and online stores lacked standing to sue.

Cote has experience handling antitrust cases involving publishers; she ruled in 2013 that Apple colluded with five publishers to fix e-book prices.

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