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Viacom's auction near end
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May 5, 1998: 11:55 a.m. ET
Simon & Schuster bids due next week with several potential buyers vying
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NEW YORK (CNNfn) - Viacom Inc. has several potential buyers interested in Simon & Schuster and could get a higher-than-expected price for the publishing assets, people familiar with the deal said.
The bidding deadline is the middle of the week of May 11, according to a person familiar with the transaction. And with negotiations in advanced stages, Viacom Chairman Sumner Redstone still hopes to raise nearly $5 billion, above the previous forecast of $4.5 billion.
"Sumner has gotten big prices for everything he's sold," said David Londoner, analyst at Schroder & Co., who put the value of Simon & Schuster at $4.3 billion.
Redstone previously had said he expected to reach a definitive agreement by the end of May. During an April 29 conference call following the media firm's earnings, the chief executive outlined several interested parties including domestic competitors, overseas publishers and financial investors.
Pearson PLC of London, which publishes the Financial Times, is the only international suitor, the source told CNNfn.
Financial players interested in the assets include Kohlberg Kravis & Roberts & Co., Hicks Muse Tate & Furst Inc. and former junk-bond king Michael Milken, who has partnered with Donaldson Lufkin & Jenrette Inc., the source said.
In addition, several competing specialty publishers also are interested in acquiring the assets piecemeal, such as Houghton Mifflin Co., Harcourt General Inc. and McGraw-Hill Cos.
"If those parts become available, we would be interested in them," said Robin Reed, spokeswoman for Boston-based Houghton Mifflin, an educational publisher.
The source said the sale still is expected to raise about $4 billion which, as previously announced, would be used to reduce Viacom's debt.
Consumer books too?
Viacom -- parent company of TV networks like MTV and Showtime as well as Paramount studios -- announced on Jan. 14 its intentions to sell the professional, education and reference book operations of Simon & Schuster. But at the time, the media company told investors that it wanted to retain the consumer books business.
By the April 29 conference call, though, Viacom was signaling its intentions to include the consumer books operations. And that decision definitely will escalate the overall price tag, said Philip Olsen, fixed-income analyst at UBS Securities.
It is the consumer book business that is likely fueling the interest of publishers such as Pearson, whose Penguin Books USA subsidiary stands to gain significantly from a possible tie-up.
"It's definitely a consolidating sector. With few assets likely to come on the block, you can definitely command a premium," Olsen said.
"Knowing there's not going to be another opportunity tomorrow to buy the next player, you have a lot of people betting on this round right now," Olsen said.
And analysts such as Schroder's Londoner believe sufficient interest exists for Redstone to leverage bidders against each other and garner a higher price.
"If you have this many bidders, the seller has a picnic. He'll play one off the other," Londoner said.
Viacom officials declined to comment on the situation. A McGraw-Hill spokesman also declined to comment.
Representatives of Pearson, KKR, Hicks Muse and Harcourt General couldn't immediately be reached for comment.
-- by staff writer Robert Liu
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