NewsWire: Vivendi to Buy Houghton Mifflin - Reuters

Xenite.org called our attention to this news item announcing that Vivendi Universal, which bought Havas Interactive, the owner of Sierra On-Line, which is publishing a series of Tolkien-inspired console games, has announced plans to buy Houghton Mifflin, which is JRR Tolkien's US publisher.


Vivendi to Buy Houghton Mifflin
by Cyntia Barrera Diaz

NEW YORK (Reuters) - French media conglomerate Vivendi Universal said on Friday it will buy U.S. textbook publisher Houghton Mifflin Co. for about $1.7 billion in a move that will make it the world's No. 2 publisher in the growing educational market.

Paris-based Vivendi said in a statement it would pay $60 per share in cash for Boston-based Houghton Mifflin -- a 169-year old company and one of the few remaining large independent publishers in the United States. The company plans to publish the controversial The Wind Done Gone on June 28.

The price is a 10 percent premium over its close Thursday on the New York Stock Exchange. The stock, which didn't trade for a short while Friday morning due to an order imbalance, rose $5, or 9.2 percent, to $59.56 in afternoon dealings after setting a new high.

"It is sad to see (Houghton) Mifflin go,'' said Edward Atorino, an analyst with Dresdner Kleinwort Wasserstein. ``The industry is basically consolidated, this is the last one to go. Nice price, good for the shareholders."

In another big publishing takeover, Anglo-Dutch publisher Reed Elsevier Plc Group on Thursday extended its tender offer for Harcourt General Inc. of the United States, one of the world's largest educational publishers.

The purchase of Houghton Mifflin is the latest deal for Vivendi, which under flamboyant chief Jean-Marie Messier has delivered a continuous stream of deals, including its merger with Canada's Seagram late last year.

"Our goal is to have worldwide leadership in key entertainment fields," said Messier during a press conference Friday afternoon in New York.

The Houghton Mifflin deal may be Vivendi's last major acquisition as the company has practically taken all the necessary steps to become a world media player, Messier said. Vivendi is now a leader or among the key players in the music, television, film, telecommunications and Internet fields around the globe, he said.

Less than two weeks ago, Vivendi said it was purchasing MP3.com Inc. , which operates a music downloading Web site and other music services, for about $372 million to bolster its online music division.

"Vivendi has been building capability online and education and Mifflin will provide content and brand name," Atorino said.


No. 2 IN EDUCATION PUBLISHING

The deal includes the assumption of about $500 million in debt from Houghton Mifflin, the fourth-largest U.S. educational publisher, which is readying to publish Alice Randall's parody of Margaret Mitchell's Old South novel Gone with the Wind.

The Houghton Mifflin deal would boost Vivendi Universal Publishing's position worldwide to the No. 2 spot from No. 5 in the education field, with combined annual sales seen at $2.2 billion, Vivendi said. It will also allow Vivendi to be present in four languages: French, English, Spanish and Portuguese.

"We may be No. 2 but we are very close to No. 1," Messier said, referring to British media mammoth Pearson Plc as he highlighted Vivendi multilingual products.

In a release, Vivendi Universal Publishing Vice Chairman and Chief Executive Agnes Touraine said education is a growth industry worldwide, driven by rising enrollments and increased government spending.

"After a decade of consolidation, the education market has now become global. The U.S. is the largest and most dynamic market in the world," she said.

The transaction, which is subject to regulatory approvals, will be financed largely by the divestiture of Vivendi Universal Publishing's Professional Information Division and Free Sheets. No time frame for the closing of the deal was provided by management of any of the two companies.

Vivendi Universal Publishing expect to obtain cash flow, or earnings before interest, tax, depreciation and amortization (EBITDA), of at least $75 million per year before the end of 2002.

Once the transaction is completed, Vivendi Universal Publishing expects about 48 percent of revenues to come from sales in the United States and the remainder from Europe and the rest of the world.

No downsizing in Houghton Mifflin's 3,500 head count is expected, Touraine said during Friday's press conference. "There's no need for that," she said, stressing that both companies will complement each other.

The purchase of Houghton Mifflin is considered the last chapter in the consolidation of the educational publishing industry in the United States, with only smaller independent companies left alone as easy potential bid targets: Scholastic Inc. and John Wiley & Sons Publications Inc.

"Probably there are only two companies left ... these could be sold but it is less likely because they don't do the big textbook business," said Brandon Dobell, an analyst with CS First Boston.

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