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Vivendi to buy Houghton
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June 1, 2001: 12:55 p.m. ET
Boston-based educational publisher sold to media power for $1.7B
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NEW YORK (CNNfn) - Global media conglomerate Vivendi Universal agreed Friday to acquire Houghton Mifflin, a publisher of educational textbooks, for $1.7 billion cash and the assumption of $500 million in debt.
Terms of the deal call for Paris-based Vivendi to offer $60 for each share of Houghton Mifflin's common stock. That represents a nearly 10 percent premium over Houghton Mifflin's closing price Thursday of $54.56.
The acquisition is expected to boost Vivendi's publishing position worldwide to the No. 2 spot from No. 5 in the education field.
"This strategic acquisition 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," company Chairman and CEO Jean-Marie Messier said in a statement. "We now have worldwide leadership positions in music, film, games, and education."
News of the purchase caused Boston-based Houghton (HTN: up $4.96 to $59.52, Research, Estimates) shares to surge nearly 9 percent in midday trading Friday while Vivendi (V: down $0.32 to $63.48, Research, Estimates) fell marginally.
Vivendi will finance the purchase by divesting its publishing unit's professional information and free sheets division. The company said the purchase will have no significant impact on its balance sheet, but will contribute at least $75 million a year to cash flow before the end of 2002.
The 169-year old Houghton, the fourth largest U.S. educational publisher with over $1 billion in annual sales, serves the elementary and secondary school market as well as supplemental, testing and college sectors.
The transaction is part of Vivendi's overall plan to build a multi-informational platform that will provide everything from music, movies to video games and books, said analyst Ed Atorino of Dresdner Kleinwort Wasserstein. Last month, the company -- owner of the world's largest record company, Universal Music Group -- agreed to buy one-time legal foe MP3.com Inc. in a bid to bolster its online music business.
"Houghton was the last 'independent' educational publisher left," Atorino said. "To get into the school market, Houghton was the last one."
Vivendi Universal Publishing will now offer products in four languages -- French, English, Spanish and Portuguese -- and will focus on games, education, and literature and health.
The transaction, which has been approved by the boards of both firms, is subject to regulatory approval. 
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