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Harcourt looking to sell?
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June 19, 2000: 11:48 a.m. ET
Textbook publisher retains Goldman Sachs to explore strategic alternatives
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NEW YORK (CNNfn) - Harcourt General Inc. retained investment banker Goldman Sachs & Co. Monday to explore strategic alternatives, including a possible sale of the company.
The textbook publisher said its current market value does not reflect the quality of its business, earnings and future prospects.
"It became clear that in keeping with our long history of focusing on shareholder value, we should examine all possibilities," said Harcourt General Chairman Richard Smith.
The Chestnut Hill, Mass.-based Harcourt General declined to elaborate but said a buyer has yet to emerge. "We'll let Goldman find people who logically should be interested. The process is just beginning," a spokesman said.
Harcourt General (H: Research, Estimates) shares have been on the rise since March. News of the deal caused Harcourt to jump 11-7/32 to 53-1/4 in mid-morning trading.
Harcourt's action to retain Goldman could mean three possible scenarios, said David Nadel, managing director at Bear Stearns. The first is a sale of the whole company to either a strategic or financial buyer.
"The potential universe of strategic buyers is quite limited," Nadel said. "The people most likely to put in a bid is another publisher but then they have to consider antitrust concerns."
The company could also sell off pieces to a potential buyer but the tax implications would make this unlikely, Nadel said.
Lastly, the company could shop for a buyer but nothing could happen.
"This could take months and months," he said. "Harcourt could remain what it is today and that is a strong possibility."
Nadel, who pointed to the 1998 acquisition of Simon & Schuster by British publisher Pearson PLC, has a $65-to-$70 price target on the deal.
"The Smith family that runs this business wouldn't put it up for auction without a significant premium," he said.
Harcourt competes against other publishers such as McGraw-Hill Cos. (MHP: Research, Estimates), Pearson, Scholastic Inc. (SCHL: Research, Estimates) and John Wiley & Sons Inc. (JWA: Research, Estimates). The education sector, as a whole, has benefited from the technology sell-off that has caused Internet-related companies to lose momentum this year. Harcourt also has a strong, predictable cash flow and a good brand that make it attractive to a buyer.
"Harcourt is a buy. We've been a pretty big supporter of the stock," Nadel said.
For the second quarter ending April 30, Harcourt reported a net loss of $40.2 million, or 57 cents a share, compared to a loss from continuing operations of $39.4 million, or 55 cents, a share for the year-ago period. 
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Harcourt General Inc.
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