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An ignominious end? One of the last great independent book publisher’s, Boston-based Houghton-Mifflin, may be chopped up and sold off in pieces, now that the giant Vivendi, to which HM sold out last year, is in trouble. According to Jim Milliot of Publisher’s Weekly:

The consensus among investment bankers interviewed by PW, all of whom spoke off the record, was that Vivendi is indeed likely to look for a buyer for HM. It is clear, one banker said, that Vivendi needs to “de-lever,” and since little integration of HM into Vivendi has taken place, the publisher could be sold relatively cleanly. “There’s no need to unbolt anything. Houghton is a discrete asset,” the banker said.

There was disagreement among the bankers about how many companies would be interested in HM. Some of the likely candidates, such as Pearson, McGraw-Hill and Reed Elsevier, could run into antitrust problems, especially at the el-hi level. Meanwhile, a factor that could keep financial buyers away is the heavy capital investment that is needed to compete in the el-hi and college markets. And without another property to add HM to, a financial buyer would not benefit from the economies of scale the largest educational publishers enjoy.

Under one banker’s scenario, the possible dearth of acquisition candidates, coupled with the slowing growth of HM’s largest market, elementary and high school publishing, means that few companies would be willing to pay a premium price for HM, and Vivendi will have a difficult time getting back the $2.2 billion price it paid to acquire

HM.

One open question is whether HM is worth more sold as a unit or in pieces. “There are a lot of bankers buzzing around New York now trying to figure that out,” another banker said. Other bankers, however, said that because HM owns unique assets, there would be a fair number of

companies that would be interested in at least a piece of HM. The college and testing segments were considered the most valuable assets, although the el-hi segment would command the highest price because of its size. The trade and reference group, which has had several strong years, would probably sell for about 1 ? times revenues if it were

sold separately.

I worked for Pearson (at the time, Prentice Hall School Division was owned by Simon & Schuster). Most of the editors I worked with were former HM editors (where the pay was terrible). Ironic if Pearson ends up acquiring the company. But it’s also sad that another great Boston institution will disappear because of short-sighted profit considerations….

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