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Five Bidders Remain for S&S; No Split-Up of Units Seen
Jim Milliot -- 4/27/98
Sources at Simon &Schuster have confirmed a report that appeared in last week's Wall Street Journal that Viacom has narrowed the potential buyers for the book publisher to five companies. The finalists break down into two publishers -- Pearson and Harcourt General -- and three investment groups: Kohlberg Kravis Roberts; Hicks, Muse, Tate &Furst; and Knowledge Universe. The latter company is a vehicle used by one-time junk-bond king Michael Milken to make investments. Another backer of Knowledge Universe is Lawrence Ellison, chairman of the computer company Oracle Corp. (Knowledge Universe is not related to Knowledge Exchange, which Milken helped back and which published his book, Unconventional Wisdom.)
The two other investment groups also have a media background, particularly KKR, which is the majority owner of the diversified publisher, Primedia. Hicks, Muse's holdings to date have been in the electronic area.

Viacom has said that it would prefer to sell S&S as one unit and, according to insiders, all five bidders are interested in acquiring the entire parts of Simon &Schuster that have been put up for sale, while Milken's group is interested in buying the consumer group as well. Viacom officials have told consumer group executives that the division is not part of the "book" that is being shown to buyers, nor is the division on the block. However, industry observers have no doubt that Viacom chairman Sumner Redstone would sell the consumer group if the price were right.

Executives at the S&S consumer group are concerned that losing the economies of scale that it enjoys as part of a larger publishing company would make it difficult to achieve the operating margins expected by Viacom. Commenting on the post-sale S&S, one consumer group executive noted that "if the company gets sold in one way, we'll have too much infrastructure, and if it gets sold another way, we won't have enough."

According to sources, final bids are due by mid-May, and there is strong sentiment among those familiar with the sale that Redstone would like to be able to announce a buyer for S&S before Viacom's annual meeting set for May 28 in Dallas.
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