September 29, 2014

Houghton Mifflin Harcourt To Go Public

This week has seen major ownership changes in the publishing business. On the newspaper and magazine front, the New York Times sold off the Boston Globe to the owner of the Red Sox for $70 million, a tiny fraction of its previous $1.1 billion purchase price; Jeff Bezos, founder and CEO of Amazon, bought the Washington Post for $250 million; and Newsweek was sold to IBT Media, publisher of the International Business Times, for an undisclosed sum. (It was last sold for one dollar, and stopped print publication last year, according to Politico.)

But while major news titles are selling for pennies on the dollar, on the book side, the big financial developments reflect much greater confidence that the marketplace will put a high value on publishers’ work. On the heels of the recently completed Penguin Random House merger, major publisher Houghton Mifflin Harcourt (HMH) filed plans with the SEC to go public, offering shares to the public worth up to $100 million.

The company was formed by the $1.75 billion acquisition of Houghton Mifflin by educational software firm Riverdeep in 2006, and the company’s $4 billion acquisition of Harcourt’s education, library reference, and trade business from Reed Elsevier in 2007. (Library Journal used to be owned by Reed Business Information, a subsidiary of Reed Elsevier.) The business saw roughly $1.3 billion in revenue last year, and has a 40 percent market share in the U.S. K-12 market.

Last year the company filed for bankruptcy, removing nearly $3 billion in debt and reducing its debt load to about $250 million. Goldman Sachs and Morgan Stanley are the lead underwriters of the public offering, joined by Citigroup, Credit Suisse, and Wells Fargo. None of the proceeds will go to the company, reports Publishers Marketplace, only to HMH’s backers, which at the time of the bankruptcy filing included hedge fund Paulson & Co., Apollo Global Management LLC, BlackRock Inc., Guggenheim Partners LLC, and Avenue Capital Group.

Now, according to the Boston Business Journal, the company is looking for more acquisitions, mostly in the area of educational technologies, though the company also bought CliffNotes and other reference titles from John Wiley & Sons last year. Since 2010, HMH has eliminated 720 full-time jobs, or 18 percent of their workforce. However, HMH has been adding headcount recently, although revenues have been down slightly,

Sales for the second quarter were $363 million company-wide, with a net loss of $14.2 million. Trade publishing sales were $39.2 million in the period (compared to about $30 million during the same quarter a year ago), with EBITDA (earnings before interest, taxes, depreciation, and amortization) of $4.6 million. HMH attributes the gains to “sales from the culinary product line as well as young readers titles.”

HMH declined to comment on how the IPO will impact its plans for the future.

Meredith Schwartz About Meredith Schwartz

Meredith Schwartz (mschwartz@mediasourceinc.com) is Senior Editor, News and Features of Library Journal.

Share