Interesting news a’bubbling in the business world this morning as media giant Thomson (NYSE: TOC) has let it be known that its Thomson Learning division is potential up for sale. That ringing a bell? Most likely, at least half of your college textbooks were published by this company, among other things: it’s expected to fetch about $5 billion in the sale.
But who might be interested in buying this division and who could afford it? Two companies immediately spring to mind for me, actually. Either the Mountain View giant Google (NASDAQ: GOOG) or Apollo Group (NASDAQ: APOL), though I admit that the latter company might be a bit hard pressed to acquire Thomson Learning for $5 bil when its market cap is only $6.5 billion.
The Wall Street Journal, as always, has a cogent article on Thomson Learning [sub required] that explains:
“Thomson Learning’s textbooks, testing and certification materials are used by colleges and distance-learning organizations, and include its Thomson Wadsworth, Thomson Gale and Thomson Delmar imprints. The unit also maintains a number of online learning courses and its own university, Universitas 21 Global, which issues graduate degrees through online instruction.
“Thomson Learning also maintains a unit called Prometric, which designs and processes tests used inside corporations, for the public sector and counts as clients the National Association of Securities Dealers and the National Board of Medical Examiners.”
If you’ve been following the painful evolution of publishing as printed material competes more and more with online and bootleg products, you might not have noticed that textbooks have proven relatively immune, so the immediate reaction of “buy a publishing house? Are you crazy?” is definitely wrong in this case.
Apollo Group, as you might recall, is the for-profit company that runs the University of Phoenix, and I can only imagine how they’d love the opportunity to merge and leverage the success that Thomson has had with its Universitas 21 Global. The synergies are obvious and the ability to jump into the Spanish speaking market would pay vast dividends over time as our demographics shift in the United States and as Apollo continues its push overseas.
Quoting the WSJ again:
“The Learning division’s revenue was $456 million, or 5% higher than in the same period a year earlier. The business growth was fueled by strong demand for some of the company’s publishing services and by textbooks for arts and sciences and for business and economics students. E-learning results, however, were weak, the company said.”
A perfect fit for the University of Phoenix owners, isn’t it?
Google still seems like a more likely buyer, however, even if Apollo is a bit more logical to my way of thinking. Google can definitely afford it and it gives them lots of interesting and valuable content that they can disseminate further. In particular, I believe that Prometric would be a fascinating partner product to the company’s existing efforts to get into the world of corporate IT as a vendor (think Google search appliance and its more recent Google hosted email, calendar, etc., for corporations and educational institutions).
Google is really focused on amassing and indexing the world’s information, however, and has already demonstrated a great amount of interest in the world of college textbooks, so being able to just swoop up an important textbook publisher would instantly give it a massive additional body of information.
Let’s try to stitch things together in a theoretical Google / Thomson Learning mashup…
Imagine you’re in college and Google’s powering the backend of your IT world. You have a Google co-branded custom home page with plug-in RSS modules that offer up your favorite sports scores, entertainment news, Google Talk buddy lists and IM, class discussion forums via Google Groups, your email via Google Mail, even videos via
Google Video YouTube. You’ve pushed all the pieces together with the company’s rudimentary Web page design tool and can easily graft in class reading lists that are accessible directly online for a small fee.
Now we’re talking about something interesting. What if Google can crack the nut of selling textbooks by the chapter, rather than by the book? It has the delivery platform and the technology necessarily to gain the necessary visibility in the academic world, along with the critical ability to actually justify to textbook authors why it’s a good thing. Now academic education becomes more flexible — especially online — because instructors can assign one chapter from expensive textbook A, and another chapter from textbook B, and so on. Mix and match, education improves, courses become more flexible, and students only pay for what they actually consume. Hmmm…
Worth noting is that as with any acquisition, the buyer of Thomson Learning could easily strip off the groups that aren’t a good fit and sell them separately or launch them as separate standalone companies, so even if not everything inside Thomson Learning fit the Google model (or Apollo’s vision for the University of Phoenix, for that matter) that isn’t necessarily a red flag.
So what do you think? What companies are sniffing around Thomson this week trying to figure out whether Thomson Learning would be a smart acquisition for their team?