Friday, February 16, 2007

Deals: Harcourt, Reed, Riverdeep

The comment to the post yesterday regarding the divestiture of Harcourt from Reed made me recall the time when Reed bought the company in 2000. At the time, as an employee of Reed I think we all rejoiced in the acquisition because for at least the prior two years the company had meandered most notably in its efforts to find a CEO. Crispin Davis was finally appointed in 1999, and started to rapidly fix the company and set a new direction. (Bowker got sold as part of the 'fixing' which was no bad thing for us).

The acquisition signified in a way that 'we were on our way' and that the company was forging ahead and fulfilling a strategic direction. Acquiring Harcourt seemed at the time to be something of a hedge; it was entirely unclear where the journals electronic revenues were going to end up. Elsevier Science was nascent and the journals business generally was getting a lot of flak from the market regarding pricing, archiving and access. The market was in total flux. On the advertising side, the business publications of Cahners (now Reed Business) were also starting to show declines in revenues and this became a major management issue. In this context acquiring Harcourt seemed a strategic attempt to spread revenue risk a little wider.

In news reports over the past day or so some analysts have suggested the acquisition may have been a mistake but this seems doubtful to me. If anything, selling the business is smart business because in today's Reed business it is easier to see where their core strengths are and they are not in education. There is a little confusion (maybe it is me) regarding the original purchase price since some assets were shared between Thomson and Reed. I am not certain if the original purchase of $4.5bill reflects the total or the portion of assets Reed got from the deal. I believe it represents the total since Reed Education has a current book value of $2.6billion. (Reuters) .

The FT reports that Riverdeep are prepared to pay £2.0billion which would make for a tidy profit on the original purchase. (The FT article says the assets purchased were worth $2.0Billion and Reuters says $4.0billion). Analysts suggest the ultimate purchase price will be between £1.8 and 2.2billion and management suggests a sale to be announced towards July.

1 comment:

r martinengo said...

Here is an interesting side note - the AAP's efforts to 'spin' open-access journals: