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Overview

Summary

Cengage Learning Inc. is a for-profit corporation located in Stamford, CT. It is the second-largest college publisher in the U.S. It was formed in 2007 when the Thomson Learning division of the Thomson Corp was sold to a private equity consortium. Its focus is on research and educational publishing for libraries, schools, and businesses. Gale is one of several divisions of Cengage.

Cengage sells print books, e-books, individual e-chapters, digital curriculum solutions, study aids, courseware, and supplemental materials. The content Cengage publishes comes from both individual authors and third-party licensors. Cengage maintains long-term agreements with content providers, including The National Geographic Society, The Economist Group, the British Library, and The Financial Times.

In addition to reselling content in digital format, Cengage also produces digital tools and platforms to enable discovery and use of that content. These platforms include CourseMate, an interactive e-textbook with multimedia resources, and Course360, an online or hybrid course platform. Digital collections produced and distributed by the Gale subsidiary include The Shakespeare Collection; The Making of  Modern Law; Supreme Court Records and Briefs; and The Times Digital Archive.

Sources

The information in this report is based on a variety of sources, including news reporting in the financial and trade press, annual reports and other publications of Cengage Learning, secondary sources such as books and journal articles, and sources within the Cengage Learning organization. 

Authors

Center for Research Libraries

  • Marie Waltz
  • Bernard Reilly

Analysis

Mission and History

Cengage’s mission, as expressed on the company’s website, is to be “the most respected and innovative source of teaching, learning, and research solutions for the academic, schools, professional and library markets worldwide.” The website also indicates that the firm is devoted to producing courseware, textbooks, databases, and tools that promote research and learning at the K-12, postsecondary, and adult levels. 

Cengage Learning Inc. was formed in 2007, through the divestment of Thomson Learning by Canadian information publisher the Thomson Corporation[i]. At that time, the Thomson Corporation was in need of capital to finance its buyout of Reuters Group plc. Thomson sold Thomson Learning for $7.75 billion to Apax Partners LLP (a private equity investment group) and Omer Capital Partners (which manages the Ontario Municipal Employees Retirement System).[ii]

Cengage subsequently acquired a number of other properties in the educational publishing field:  Houghton Mifflin’s College Division, High Beam Research, Gatlin Education Services (now known as ed2go), and PAL Publications, and in August 2011, the National Geographic Society’s School Publishing Unit.[iii]

Cengage Learning also inherited some well known publishing brands from Thomson. These include:

  • Heinle, a language textbook publisher
  • Wadsworth, publishers of books and digital content for the humanities and behavioral and social sciences
  • Delmar Learning with products and services for adults in the areas of health care, technology, and career education
  • Brooks/Cole, publishers in math, chemistry, social work, and counseling
  • South-Western, business and economics texts
  • Course Technology, integrators of textbooks with software
  • Gale, a publisher  of library reference materials and primary source content[iv]

 

In July 2010, Cengage combined their three divisions, Academic and Professional, Gale, and International, into one business unit. This led to “greater integration of content and technology among its products and services, eliminated organizational redundancies, and focus technology investments.” The company next reorganized its functional areas in September 2011.[v]  That restructuring consolidated the Academic & Professional Group and Gale.[vi]



[i] Dunn Moves Up; Cengage Looks for New CEO. Educational Marketer; 7/16/2012, Vol. 44 Issue 15, p1-7, 2p Available online: http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=77905587&site=bsi-live&scope=site

[ii] "Cengage Learning completes acquisition of Houghton Mifflin College Division assets," Press Release. June 2, 2008. Available online: http://www.apax.com/news/apax-news/2008/june/cengage-learning-completes-...

[iii] Cengage Annual Report 2012 p.10

[iv] Cengage Annual Report 2012. P.1

[v] Cengage Annual Report 2012, p.7

 

Governance and Staffing

Cengage Learning is essentially controlled by its majority shareholder, the private equity firm Apax Partners LLP.  The current CEO, Michael E. Hansen, was appointed in September 2012. Prior to his appointment, Hansen was chief executive at Elsevier Health Sciences. The former CEO, Ronald G. Dunn, had held the position since Cengage’s inception in 2007, and continues to hold the post of Chairman of the Board of Directors.

Most members of the Cengage’s Board of Directors are appointed by Apax Partners. Also serving on the Board are David Shaffer of Thomson Reuters Corporation and Christian Stahl of Apax Partners, LLP.[i]



[i] Webpage: Company Overview of Cengage Learning, Inc. http://investing.businessweek.com/research/stocks/private/people.asp?privcapId=515355. Viewed 5/29/2013

 

Funding and Planning

Cengage’s financial situation is complex; it is a major player in its field but is saddled with huge debts. At this time, the main concern over Cengage’s financial future is related to their debt load and the vagaries of the textbook publishing market.  95.9% of Cengage’s market is in the U.S.[i]

Cengage revenue has remained flat at around the one-billion-dollar mark for several years. In the case of Gale, 71% of revenue was from recurring subscriptions and sales. 93% of its digital subscriptions in 2010-11 were renewals[ii]. This suggests that there is little new growth in the market for Gale products.  

The combination of a flat market and continually rising expenses, the latter stemming from technology investments and further Cengage acquisitions, has resulted in steep operating losses for Cengage over the last five years.  Cengage also continues to carry a sizable debt load from its purchase in 2007.

According to the auditors’ report on the corporation’s finances at the end of 2011, Cengage’s then current liabilities exceeded its current assets by over $16 million, and the organization had an accumulated deficit of over $33 million. 

In early 2013, The Financial Times reported that “Cengage must repay $2.42 billion of debt between June 2014 and June 2015 unless it can renegotiate the terms of its borrowings. Interest payments are due in June 2013, when PriceWaterhouseCooper, its auditor, must decide whether to qualify Cengage’s accounts[iii].”

Apax Partners currently holds a debt of several billion left from its purchase of Cengage for $7.75 billion in a 2007 leveraged buy-out.[iv]  Since February 2013, Apax Partners has bought up more than $800 million of Cengage’s debt. The decision to acquire more of Cengage’s debt has been widely interpreted as a move to keep control of the company should Cengage file for bankruptcy.[v]

Currently Cengage employs approximately 5,500 people; in 2007, it employed 12,000.[vi]



[i] Cengage Annual Report 2012. P.1

[ii] Cengage Annual Report 2011. P.6

[iii] Edgecliffe-Johnson, Andrew. Anne-Sylvaine Chassany , "Cengage looks to restructure $5.3bn debt load," Financial Times 22 Mar 2013. Available online at: http://www.ft.com/cms/s/0/8169ae0c-931f-11e2-9593-00144feabdc0.html#axzz...

[iv] "TITANS THAT TUMBLED; Britain's 'masters of the universe' are losing out to their American private equity cousins as global markets contract, writes Helia Ebrahimi." The Sunday Telegraph (London). (March 31, 2013 ): 1933 words. LexisNexis Library. Web. Date Accessed: 2013/05/23.)

[v] Spector, Mike and Emily Glazer, "Buyout Firm Gathers Cengage Debt Apax Partners Gets in Position to Fight for Control of Struggling Textbook Firm" Wall Street Journal. Business Updated  26 Apr 2013 Online : http://online.wsj.com/article/SB1000142412788732474370457844669164758437...

[vi] :"Cengage Learning Inc." Ward's Business Directory of U.S. Private and Public Companies. Ed. Virgil L. Burton III. 56th ed. Detroit: Gale, 2013. 13626 pp. 8 vols. Gale Directory Library. Gale. Des Plaines Public Library. 23 May. 2013 http://find.galegroup.com.ezproxy.dppl.org/gdl/start.do?prodId=GDL.

 

Stakeholders and Designated Community

Cengage primarily serves the needs of the K-12, secondary, and post secondary education market, with academic libraries and public libraries being the primary subscribers and clientele for its Gale division products. Gale's market reach extends primarily to the United States, Canada, and the United Kingdom.

 

 

Preservation of Repository Content

Provisions for Continuity

Aside from content produced by Gale, it is not clear how Cengage has provided for continued access to its content and products in the event of a business failure.  However, Gale has committed to deposit many of its archival collections in the Portico repository. Should these databases become unavailable from Gale Portico is authorized to make them available to libraries that originally subscribed to or purchased them from Gale.

As of May 30, 2013 there were sixteen Gale collections archived in Portico: 

Eighteenth Century Collections Online (Parts I & II)

The Making of Modern Law: Legal Treatises

The Making of Modern Law: Trials

The Making of the Modern World

Nineteenth Century British Library Newspapers

Nineteenth Century US Newspapers

Sabin Americana

The Making of Modern Law: US Supreme Court Records and Briefs

Literature Criticism Online

“Something about the Author” Online

Gale Virtual Reference Library

National Geographic Magazine Archive

Nineteenth Century Collections Online

Smithsonian and Air and Space Magazines

Should these databases become unavailable from Gale, Portico is authorized to make their contents  available to libraries that are "contracted customers" of Gale, i.e., those that originally subscribed to or purchased the databases. Note that this access model  differs from the access model for Portico journal and e-book archives, which Portico is authorized to make available to all Portico subscribers in the event of publisher failure. 

Portico is authorized to make the content available to Gale customers under specifically defined circumstances called "trigger events." These events are defined in Portico's standard agreement with D-Collection publishers.

It is not clear, however, what terms Portico could impose on Gale customers entitled to continued access to the Gale content through Portico, and on what platform the Gale content would be provided.

 

 

Updates

Updates

On September 27, 2013 Cengage notified creditors and stakeholders of its intent to file "an amended Chapter 11 reorganization plan and a 'related disclosure statement'."  The new reorganization plan, filed on October 3, 2013, is available on the web at:  https://dr201.s3.amazonaws.com/cl/Joint%20Plan%20Dkt%20552.pdf

On July 2, 2013, Cengage Learning announced that it had filed for Chapter 11 bankruptcy "as part of a pre-arranged restructuring.  On July 2 Reuters reported that "Cengage said it won support from a group of first-lien lenders for the restructuring, which would eliminate more than two-thirds of its . . . roughly $5.8 billion of debt."  

On June 3 and June 7, 2013, CRL held conference calls with Frank Menchaca, Senior Vice President for Global Product Management at Cengage Learning.  A summary report on those calls was circulated to CRL library directors and to others who attended the calls, on June 13.  

The June 13 report described lingering concerns, arising from the relationship between Gale and the parent company, Cengage Learning.  CRL concluded that the Cengage/Gale situation is not in itself a cause for alarm at present, but bears watching.   

 

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