The acquisition of Houghton Mifflin by Vivendi Universal marks "a new beginning and a new chapter for our company," said HM chairman Nader Darehshori. The French media conglomerate reached an agreement in principle June 1 to acquire the publisher in a deal valued at $2.2 billion. Under the agreement, Vivendi will pay $1.7 billion in cash and assume $500 million in debt to acquire America's fourth largest educational publisher. The purchase price is approximately 2.1 times HM's 2000 revenues of $1.03 billion, or about 1.9 times its projected sales for 2001, in line with analysts' expectations when word of a possible deal first surfaced last month (News, May 28). Darehshori said that since the purchase has no antitrust issues, he expects the transaction to close by the end of July.
After the acquisition is completed, Houghton Mifflin will become part of Vivendi Universal Publishing, whose holdings include Larousse, Anaya and Knowledge Adventure. The addition of HM will boost VUP's worldwide sales to $2.2 billion, with 48% of that total generated in the U.S. Vivendi will finance the acquisition through the sale of its professional information and Free Sheets divisions. The divestiture of those units combined with the HM purchase will focus VUP on the game, education and literature, and health segments.
Vivendi chairman Jean-Marie Messier called the purchase "a strategic acquisition" that "is another step forward for Vivendi Universal to achieve world leadership in key content segments." In addition to publishing, Vivendi's media and technology properties are involved in music (through Universal Music Group), TV and film, telecommunications and the Internet. The company is also the majority owner of Vivendi Environment, which provides environmental management services such as water treatment and waste management.
In a meeting with analysts, Darehshori said he moved quickly to make the deal with Vivendi because he believed HM "found a good partner" and would not find a better partner if it waited a year or two. He called VUP a "great global publisher" that will help HM grow its international business, which currently represents only 5% of total sales. Darehshori said he looked forward to using Vivendi's technology "to sell ideas in countries for far less than on the printed platform." Another important point in Vivendi's favor was that it promised to preserve HM's autonomy and the company will keep its Boston headquarters, Darehshori said. "Any way you look at it, it was the right time to do the deal," he declared. Darehshori said he will stay and help Vivendi with the transition, and after that "it is up to them" about his future relationship with the company. Darehshori was scheduled to retire next April.
Asked by an analyst to rate the other major players in the educational publishing field, Darehshori said Harcourt is a "strong competitor," while "McGraw-Hill has had great success in elementary and high school." He called Pearson "spotty," explaining that they have a great presence in some areas but are not so great in others. He also maintained that teachers have showed no reluctance to buy materials from publishers who are owned by foreign companies. "Believe me, our salesmen tried to make it an issue, but it didn't work," Darehshori said.