The acquisition is to be accomplished through a cash tender offer for all of Houghton Mifflin’s common stock at a price of $60 per share. Following completion of the tender offer and necessary approvals, Vivendi Universal would consummate a merger in which all of the remaining Houghton Mifflin shareholders will receive the same price paid in the tender offer in cash. The transaction is subject to regulatory approvals and to other customary conditions, including the tender of at least two-thirds of the Houghton Mifflin shares.
Based on a total consideration of approximately $2.2 billion, which includes the assumption of Houghton Mifflin’s average net debt of $500 million, the offer price represents 1.9 times 2001 estimated revenues of Houghton Mifflin, 7.7 times 2001 estimated EBITDA (earnings before interest, taxes, depreciation and amortization) and 10.7 times estimated EBITDA after book plate amortization.
With education as a growth sector worldwide, and following more than ten years of consolidation, the education market is now global. This acquisition is consistent with Vivendi Universal?s strategic plan, which is on target to make each of its content business units world leaders in their respective fields.
As a result of the acquisition, combined annual sales will total $2.2 billion, boosting Vivendi Universal Publishing?s position worldwide to the No. 2 spot from No. 5 in the education field. Already a leader in France, Spain and Brazil, with a very strong market share throughout Europe and Latin America, with this transaction, VUP will become an education publishing leader in the U.S.
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, following the work councils information and consultation. These businesses are more cyclical than education publishing.
The acquisition will allow Vivendi Universal to undertake immediate synergies in production/logistics and corporate restructuring with Vivendi Universal Publishing?s U.S. operations. VUP estimates that those synergies will reach at least $75 million per year at the EBITDA level before the end of 2002. Thanks to the financing of the transaction, mostly through asset sales, the transaction will have no significant impact on Vivendi Universal?s balance sheet, and will be accretive for Vivendi Universal shareholders at EDITDA/share level from year one, both before and after synergies. After pro forma synergies, this accretion is over 2%. As a result of the transaction, Vivendi Universal is strengthening its core content businesses, gaining a worldwide leadership position in education.
Commenting on today’s announcement, Jean-Marie Messier, Chairman and Chief Executive Officer of Vivendi Universal, said: The acquisition of Houghton Mifflin propels Vivendi Universal Publishing to the No. 2 position worldwide in education publishing and significantly enhances its position in the U.S. textbook market.
Mr. Messier continued, This strategic acquisition is another step forward for Vivendi Universal to achieve world leadership in key content segments. It will put us in an excellent position to capitalize on the growth of the education sector by leveraging the content and technologies of both companies across all of Vivendi Universal. Our priority is to develop the most attractive and compelling content offering on all devices and platforms for our consumers. We now have worldwide leadership positions in music, film, games, and education. Thanks to the arbitrage within our publishing portfolio, the acquisition will not impact our balance sheet and will be accretive to our shareholders.
This transaction represents a new and exciting chapter in Houghton Mifflin’s history, said Nader F. Darehshori, Houghton Mifflin Company’s Chairman, President and Chief Executive Officer. By combining with Vivendi Universal, we become an integral part of a global publishing powerhouse ? a company with international scale, rich content and vast digital and distribution capacity. Financially, this transaction provides immediate value to our shareholders, and, as part of Vivendi Universal’s publishing operations, Houghton Mifflin will have the financial resources, talent and tools to further accelerate our own growth in the digitization of our products and services, as well as new channels of distribution for our authors, greater opportunities for our employees, and a broader range of products for our customers. Finally, Vivendi Universal respects our nearly 170-year heritage and great brand names, and have stated their intent to maintain our presence in Boston.
Agnès Touraine, Vice Chairman and CEO of Vivendi Universal Publishing, said, Education is a growth sector 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. Houghton Mifflin presents a tremendous growth opportunity for our company, and I welcome them very warmly. With the acquisition of Houghton Mifflin, VUP will be present in four languages – French, English, Spanish and Portuguese. It will also strengthen prominent local brands, including Houghton Mifflin, Larousse, Anaya, Knowledge Adventure, and will give us a real competitive advantage compared to U.S./U.K.-centric companies. VUP will also have a strong position on as many platforms as possible, including the Internet, publishing and CD-ROM.
I also would like to extend my strong thanks to and admiration for all the teams of the professional information division that will soon leave our company, she continued. I would like to say how impressed I am by their tremendous performance and many accomplishments in recent years.
When this transaction is completed, VU Publishing will be focused on three main segments: Games, Education and Literature, and Health. Approximately 48% of VUP’s revenues will come from the U.S. and the remainder from Europe and the rest of the world. VUP will also maintain its presence in news and economic publications, with Groupe Express, Groupe Expansion and Groupe Etudiant.
