A private equity firm is considered the most likely candidate to acquire Harcourt Education, which was put on the auction block last week by parent company Reed Elsevier. With revenue of £889 ($1.6 billion) and operating profit of £129 million ($237 million), Harcourt Education is expected to sell for at least $3 billion. In the most recent deal for an educational publisher, Riverdeep agreed to pay $1.7 billion and will assume $1.6 billion in debt to acquire Houghton Mifflin, which had 2005 sales of $1.3 billion. The size of Harcourt precludes the country's largest educational publishers, McGraw-Hill and Pearson, from making a bid because of antitrust concerns, while other American media conglomerates have shown little interest in recent years in educational publishing.

Reed Elsevier (PW's parent company) acquired Harcourt Education as part of its purchase of Harcourt General in early 2001. Ironically, Reed sold Harcourt's higher education unit and some other divisions to Thomson Corp. immediately following the Harcourt General purchase; late last year, Thomson announced it was looking for a buyer for those properties.

In looking to shed their respective educational operations, both Reed and Thomson said the businesses did not fit with their strategic goal of generating more revenue from digital products. Reed reported last week that digital sales grew 10% in 2006, to £2 billion, representing about 37% of total sales.

Harcourt Education includes the pre-K—grade 6 publisher Harcourt School Publishers; Holt, Rinehart and Winston, publisher for grades 6—12; the supplementary publisher Harcourt Achieve; Harcourt Trade Publishers; the library reference publisher Greenwood-Heinemann; Harcourt Assessment, publisher of tests for education, business and government; and Harcourt Education International.

When Harcourt General was for sale in 2000, there was quite a bit of speculation about whether Harcourt Trade would be sold in a separate transaction, and rumors have already begun about such a scenario this time around, although Reed is believed to prefer to sell Harcourt Education in its entirety. Still, with a stellar backlist of about 2,500 titles and annual revenue estimated at more than $60 million, Harcourt Trade could provide a nice jolt to one of the large trade houses looking to boost sales in a sluggish market.

Harcourt Education Sales ( millions of £)

2006 £ 2005 £ % change at constant currencies
Source: Reed Business Information
Revenue £889 £901 0%
U.S. School & Testing 796 806 +1
International 93 95 0
Adjusted operating profit 129 161 -19