Apollo Global in talks to buy education business of McGraw-Hill in a $2.5 bn deal: report

Private equity firm Apollo Global Management is in exclusive talks to buy the education business of McGraw-Hill Companies Inc, in a deal that could be worth about $2.5 billion, The Wall Street Journal yesterday reported, citing people familiar with the matter.

Apollo beat rival bidder Apax Partners, majority owner of Cengage Learning, to become the preferred bidder for McGraw-Hill Education, said the report.

Cengage was acquired by Apax Partners and OMERS Capital from Thomson Reuters for about $7.75 billion in 2007.

The final price tag of $2.5 billion is far below the $3 billion - $4 billion that McGraw-Hill was seeking from the sale. It could still opt to spin off the unit as initially planned, if offers fall short of expectations.

New York-based McGraw-Hill lowered its expectations after it sent out revised lower financial information and projections for the business to prospective buyers during the sale process, said the report.

For the third quarter ended 30 September, McGraw-Hill Education generated $836 million in revenue, down 1by 11 per cent from the year-earlier period, while operating profit declined 20 per cent to $253 million due to a continuing weak kindergarten-to-grade 12 market.