Toronto’s Top Hat buys fourth conventional publisher, stepping up efforts to digitize textbook business

Toronto online education company Tophatmonocle Corp. has made its fourth acquisition of a traditional course-material publisher as it advances its strategy to digitize the textbook business.

The company, known as Top Hat, said on Thursday it had bought Denver-based Morton Publishing Co., a 44-year-old independent press that publishes more than 600 lab and course materials focused on the sciences, which are used at 1,500-plus institutions in the United States.

Terms were not disclosed, but Top Hat chief executive officer Joe Rohrlich said the price was “in a consistent range with prior acquisitions” by his company. The Globe and Mail has reported Top Hat paid US$20-million to US$30-million each for U.S. publishers Fountainhead Press and bluedoor, as well as the university textbook publishing business of Nelson Education Ltd., picking up a combined 1,300 titles before the Morton deal.

Top Hat started in 2009 with a goal of building an iTunes-type service for higher-education content. Founder and former CEO Mike Silagadze, who hand-picked Mr. Rohrlich as his successor earlier this year, believed textbook publishing was ripe for the same digital disruption the music industry had experienced a decade earlier.

The company initially offered to produce digitized versions of textbooks for publishers, but they wanted only PDFs, for which they charged full prices. So Mr. Silagadze marketed the platform to professors to publish their own interactive multimedia online textbooks. Top Hat made the content available to others on the platform, offering authors a higher cut than they earned writing conventional texts, while charging students less than industry norms. It has also expanded the functionality of its platform to enable professors to teach and lecture by video.

In the past two years, Top Hat’s strategy evolved to buying conventional publishers of postsecondary course materials and then shifting the product to digitally distributed versions with a goal of eventually abandoning physical formats. The company raised US$55-million last year to fuel acquisitions, and added another US$50-million to its coffers for more deals as part of a US$130-million investment this year by Toronto growth capital firm Georgian Partners in Top Hat equity.

“They’ve been able to take the old world of publishing and bring it to the new world,” in which users pay subscription fees for online access, said Michael Hyatt, a Top Hat investor and adviser to Georgian. “They’ve been able to do what every publisher always wanted to but couldn’t because they didn’t have the platform, the technology or the know-how to create a digitized subscription basis for their model.”

Mr. Rohrlich said Morton’s 600 titles will complement the science-oriented ones his company picked up with its acquisition of Minneapolis-based bluedoor, giving Top Hat “an outstanding offer entering into the STEM disciplines and into labs specifically.”

Mr. Rohrlich said Top Hat is actively looking for more deals, adding “we are seeing larger-scale opportunities compared to those we have done to date.”

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