NEW YORK McGraw-Hill Companies Inc's MHP.N education unit is expected to draw final bids from private equity firms Bain Capital and Apollo Global Management (APO.N) as well as rival Cengage Learning Inc, in a deal that could fetch around $3 billion, several people familiar with the matter said.
Cengage, the No. 2 U.S. college textbook publisher, and the two private equity firms are working on final offers for McGraw-Hill Education, the world's second-largest education company by sales, with the bids due later in October, the people said.
McGraw-Hill, which is running the auction as an alternative to its planned spin-off of the business, wants to get more than $3 billion and could still decide against a sale if the bids fail to meet its price expectations, the people said this week.
Other private equity firms that submitted initial bids this summer, such as Thomas H. Lee Partners LP and Providence Equity Partners, dropped out because they felt the asking price was too high, according to the people familiar with the matter.
McGraw-Hill, Cengage, Apollo, THL and Providence declined to comment. Bain did not immediately respond to requests for comment.
McGraw-Hill Education, which had revenue of $2.3 billion and operating income of $260 million in 2011, distributes its textbooks in 65 languages across 157 countries. About 18 percent of the revenue is international, with digital-related solutions accounting for over 20 percent.
Cengage was acquired by Apax Partners LLP and OMERS Capital Partners from Thomson Reuters Corp (TRI.TO), the parent company of Reuters News, for about $7.75 billion in cash in 2007.
The sale or spinoff of the education unit comes more than a year after minority shareholders JANA Partners LLC and the Ontario Teachers' Pension Plan publicly urged McGraw-Hill to restructure.
McGraw-Hill, which has since streamlined its portfolio and made management changes, has said it would split into two publicly traded companies - McGraw-Hill Financial and McGraw-Hill Education.
The financial company will include credit ratings agency Standard & Poor's, S&P stock indexes, Platts commodity information and S&P Capital IQ. The company also accelerated stock buybacks and announced a drive to cut $100 million of annual costs from its nearly $5 billion of expenses.
(Reporting by Soyoung Kim, Nadia Damouni and Greg Roumeliotis in New York; Editing by Richard Chang)