Cengage president and ceo Ron Dunn wrote to employees on Thursday to announce that he will "soon step aside...and take on a new role as executive chairman," promising he will serve in that role for at least 3 years. Dunn is 65 and admits, "realistically, we're still some time away from making Cengage Learning a publicly traded company through an Initial Public Offering of stock; and when the IPO does occur, investors will rightly expect that the CEO will continue in that role for several years. Those facts, taken together, lead to an inescapable conclusion: it's time for a younger CEO to take the helm and lead Cengage Learning through the next stages of its development." The company said in a short statement that it "is in the advanced stages of a search to identify Dunn's successor." Dunn tells the FT he expects an announcement "within a few weeks" and indicates they are looking for someone who has "participated in the digital transition." Additionally, David Shaffer will retire as chairman and board member on September 30, when Dunn is expected to make his formal transition.
Indeed, Cengage is still working on managing its oversized debt load of roughly $5.7 billion--a vestige of Apax Partners' acquisition of the company for approximately $7.75 billion in 2007. Dunn made his announcement now because the company is going out to investors with a debt maturity extension program, and his departure is potentially material information.
In the latest phase, the company announced they have refinanced $710 million in senior notes, moving the payment date from 2015 to 2019, in exchange for a higher interest rate of 12 percent (up from 10.5 percent). In April they extended the payment date on roughly $1.3 billion in term loans, and next they will try to push back payment of approximately $450 million in bonds. Dunn tells the FT, "this is designed to give us time to get to the IPO and have the major refinancing of debt then." So far it seems that Cengage's lenders have not had to take the big losses suffered by those who financed other outsized acquisitions like Houghton Mifflin Harcourt. But debt service is costing the company well over $500 million a year, on revenues of $1.88 billion in the fiscal year ending June 2011.
In other personnel news, former publisher and editor-in-chief at Bantam Nita Taublib will join Putnam as executive editor on Tuesday, reporting to Ivan Held, who says she will "will primarily seek out and grow new fiction franchises, utilizing her terrific eye for finding and creating top-ranking bestsellers." Taublib was most recently a strategic advisor for Open Road, concentrating on romance.
Leah Johanson has joined Free Press as publicist. Previously she was an associate publicist in the Random House Publishing Group.