Ingram Sell VitalSource to Francisco Partners

Big news in education publishing:

From their press release:

Ingram Content Group® (“Ingram”) today announced it has signed a definitive agreement to sell VitalSource Technologies LLC to Francisco Partners, a leading global investment firm that specializes in partnering with technology businesses. 

Under Ingram’s leadership, VitalSource was transformed from a small venture serving a niche market to a global leader in digital content distribution. Ingram first acquired VitalSource in 2006 with an eye to grow it into a larger digital learning platform that could serve the higher ed market and more. This was part of a larger effort by Ingram to help the book industry leverage technology to transform the way content is accessed and in turn, the way the book industry works.

"We are very proud of the extraordinary value-add VitalSource offers the academic and professional communities. VitalSource has grown into one of the leading digital curriculum delivery and learning platform providers with proven scalability and reliability at a time where digital content and online learning is very much in demand,” said Ingram Content Group President & CEO Shawn Morin. “Francisco Partners is committed to furthering the VitalSource mission of improving learner outcomes and accelerating our commitment to developing innovative, forward-thinking solutions and platforms that open doors to affordable and impactful learning experiences to students and professionals around the world.”

 More to follow.

Ten Educational Start-ups to Watch

Ginkgotree is a web app which aims to completely replace costly, bulky textbooks. It’s not another LMS (a Learning Management System, like Blackboard); it’s a content platform that integrates seamlessly with your LMS, with the goal of giving students and faculty a solution superior to textbooks for much less money.  Faculty create a complete bundle of learning materials for their course, from nearly any source, including published textbooks, documents, websites, and videos. Then, students can read and discuss all the course materials in one place through a simple and beautiful interface. 

MasteryConnect: The Salt Lake City-based startup focuses, particularly, on formative assessments — a type of assessment that involves qualitative feedback (instead of relying on scores) and takes place during the learning process, with the goal of helping educators tweak their activities and approach to teaching with the goal of helping students learn more effectively. MasteryConnect, then, makes it easier for teachers to create these types of assessments and share them with colleagues, parents and students.  (Techcrunch)



Panorama Education: “We’re helping schools measure things, gather feedback and then use that data to improve,” Feuer said in an interview. “The big reason schools use us over SurveyMonkey is that we help them figure out what to ask, and we help them figure out what to do with the information. Tools like SurveyMonkey are great to just tell you the answers to whatever your surveying someone about, but if you want to understand what that actually means and how to interpret it, and you want to look at it in context with other data than you need something like Panorama.”  (Techcrunch)

StraighterLine is focused on bringing price transparency to online education, offering general ed courses that students generally take (and are often required) during their freshman and sophomore years, like Algebra, Biology, Calculus, U.S. History, and English Composition, to name a few — on the Web. If we say the average price for a private institution is about $32K per year, StraigherLine’s pricing compares favorably, with the option to pay $100 a month, plus $39 for each course started, $399 per course, or a full freshman year education for $1K.  Included in this pricing is free live, on-demand instruction, although if students choose to buy a textbook, they have to do so separately. But the cool part is that the startup’s courses are ACE Credit recommended and can be transferred for credit to a number of degree granting institutions. Over 25 grant credit today, with more than 200 universities across the U.S. having accepted post-review. (Techcrunch)


StudyBlue: Today, StudyBlue has become a “digital backpack,” with its web and mobile study tools enabling college and high school students to store and organize their course materials, turning them into flashcards, quizzes and study guides that can be accessed on the go. By allowing students to share the content they create with others, the startup has amassed an enormous library of user-generated study materials — over 100 million in total — which cover a wide array of subjects, from zoology to anthropology.  (Techcrunch)


GroupNotes: To address what educators were looking for, Groupnotes developed a collaborative platform that can get an entire class on board working together on a single topic or course of study. As members of a group browse the web, they can take notes and annotate pages with drawings and text comments, and as other users also browse, they can see and add to those breadcrumbs. It also collects notes in a group dashboard, and information is communicated between group members in real-time, meaning that a prof leading a class could be viewing materials as students in the class comment, note and ask questions on their individual devices. (Techcrunch)


Noodle Education: The startup is on a mission to bring a Netflix-style recommendation engine to the fragmented and noisy world of education. Not unlike Google, Noodle Education wants to organize the world’s learning platforms and aggregate the huge amount of educational info out their on the Web into a learning-centric, personalized search and recommendation engine.  The company announced the acquisition of Lore (formally CourseKit).  Initially focused on building forums around courses with tools designed specifically for teachers, last fall, Lore launched its student-facing platform to let students create academic profiles, follow classmates and professiors and join study groups, clubs, and so on. The network had its first semester live last spring, and since then has signed up more than 600 schools and added thousands of courses across a range of disciplines. (Techcrunch)


Pearson Education acquires Learning Catalytics: Founded in late 2011, Learning Catalytics is a platform that allows teachers to ask their students open-ended critical thinking questions and receive feedback in realtime. But beyond simply being a student response system and allowing teachers to get a better sense of what areas students are struggling with, the startup’s platform allows teachers to split their class into groups of similar ability. (Techcrunch)


Grades.io which launches today as an early MVP, after around six weeks of total development time. While not as feature-complete or as final in terms of design as Lowry plans to make it, even the MVP of Grades.io is worlds better than the bulk of available class management software, and that’s mostly because its design and user experience has been approached with a light touch.  (Techcrunch)

General Assembly, the New York-based education startup that offers classes and mingling space to tech developers and entrepreneurs, has raised $10 million in new funding, via an SEC filing. General Assembly originally launched as a co-working space but quickly evolved into an urban educational facility and event space for the technology and design industry. (Techcrunch)

Croudsourcing Investments in Books: It will happen.

Eric Hellman over at the eponymously named Go To Hellman has an interesting idea that chips away at one of the last foundations of big publishing; the 'investment banking' attribute that big publishing brings to the industry.  Here's a snip from his blog post this week:

There's nothing intrinsic about crowd-funding that restricts this sort of fund-raising to unknown authors looking for a first advance. The JOBS act restricts the amount raised from "unqualified investors" to $1,000,000, so the really big name authors would have to tap the "qualified investor" funding market. (An individual with more than a million dollars in assets excluding home and vehicles is considered "qualified")

Once equity crowd-funding becomes established for books (and it WILL happen!), incumbent publishing houses will have lost, at a stroke, their oligopoly on books as investment vehicles. Already, publishers are outsourcing their design, editorial, production, distribution and sales functions; providing capital is their last bastion of essential function. They will have to participate in the new markets or they will dissipate into irrelevancy.

Read the whole thing.

Speculation over Reed Elsevier (Again): Missing the Bigger Point

Several UK Sunday newspapers report new speculation about the future of Reed Elsevier and specifically whether the company could be ripe for a private equity buy-out. Shares were volatile on Friday in what could be more a reflection of market boredom than anything else. Since Erik Engstrom took over the CEO role a year ago, analysts have speculated that the company would either shed assets or be taken private given the company's languishing share price and inconsistent performance across the group. Last week the company confirmed their full year guidance which calls for "modest" erosion of margins given a strained revenue outlook (Bloomberg):

“As previously stated, a modest reduction year-on-year in adjusted operating margin is expected due to a weak revenue environment and increased investment in legal markets,” the London-based company said in a Business Wire statement today. “Any sustained recovery is expected to be gradual and remains dependent on economic conditions.”

Subscription sales in many professional markets are still constrained by “low customer activity levels and budgets,” while advertising and other cyclical markets continued to stabilize, according to the statement.

“In the second half we have continued to sharpen our focus in key markets, through new product development, increased sales and marketing activities, and portfolio realignment,” Chief Executive Officer Erik Engstrom said in the statement.

Weakened renewal subscriptions are likely to constrain revenue for sometime given annual subscription cycles in addition to weakness in the professional markets such as their legal market. The company has sold off some smaller business and products - last week they sold a German business unit to Wolters Kluwer for example but in total these seem minor compared with what analysts and potential private equity investors may be contemplating.

The Telegraph tries to put some more meat on the bones of a somewhat old story by suggesting that the management team at Reed Exhibitions is working with private equity groups Cinven and Apax to prepare a bid for the Exhibitions business unit. Private equity as said to respect the management of the group: Whether Engstrom respects them on Monday morning may be another story.

These titillating financial stories gloss over some difficult issues for Reed Elsevier. In particular, the company is likely to see significant competition from Bloomberg as that company aggressively targets the legal and regulatory market place. Unfortunately for Reed, they may be strategically limited by not having a strong financial and business news unit which is the core of Bloomberg and which Thomson West - their other competitor - possesses in Thomson Financial & Reuters. (A deal between Reed and Reuters would have been strategically more important than the deal the company ultimately made to acquire Choicepoint). Whereas information companies built their businesses over the past 15yrs on organization around silos - financial, news, medical, legal, etc. - the rapid improvement in search, taxonomies and user interface are enabling information companies to 'reintegrate' their siloed content. This is where Reed maybe disadvantaged vis a vis Bloomberg and Thomson and whether that can be solved by taking the company private is a crap shoot. But then, that's what private equity is good at.

Subscribe to PND via RSS
Michael Cairns

See also Crains (Reg Required). C/P headline into Google.

Bibliographers Shall Inherit...Data Monopolies - Repost

I recently heard Fred Wilson speak and it reminded me of this post from February 5th, 2007:


Fred Wilson is a founder of Union Square Ventures a private equity firm located in NYC. He was also part of Flatiron Partners until he left to start Union Square. He was the key note speaker at Monday’s SIIA Previews meeting and spoke about Content; specifically that content "wants to be free."

He ended the session with a potentially more interesting theme which related to tagging and content descriptions. In answer to a question about the potential power of social nets and the attendant tagging possibilities he suggested that we shouldn’t have to tag information at all; that is, content should be adequately described for us. The questioner stated that ‘publishers are good’ at describing their content. Wilson disagreed, confirming (to me) that publishers are definitely not good at tagging or classifying their content. His comments confirm for me a belief that intermediaries that insert descriptors, subject classifications and other metadata to improve relevance and discovery will play an increasingly important role. Personally, I do not think the battle has yet been joined that will determine one provider of standardized meta-data within specific product or content categories. (Some players have clear positioning, take for example Snap-On tools purchase of Proquest’s Business Solutions unit which opens many intriguing opportunities – if you like car parts).

You may think that books are effectively categorized by Amazon.com and therefore Amazon is the standard. This is untrue: In fact there are several bibliographic book databases and none of them are compatible across the industry. Additionally, while Amazon allows great access to their data, they are not a good cataloguer of bibliographic information. Their effort is enough to serve their purposes. As a seeker of books and book (e)content, I will want to be able to search on a variety of data elements (publisher, format, subject, author) and find what I am looking regardless of the tool I am using. In my view a single source of quality bibliographic information distributed at the element level will solve this problem. Suppliers of content are beginning to understand that it is the description of the content (metadata) that is as important as the content itself.

It is really quite simple: A database provider needs to spend time standardizing their deep bibliographic content, distribute it to anyone who wants it and then figure out how they can make money doing that. Historically, a vendor had to create their own product catalog because either one didn’t exist or they preferred to build it themselves. Look at office products or mattresses. It is nearly impossible to compare items across vendors. Books and other media products are slightly easier but the legacy of multiple databases continues to reduce efficiency. Management of a product database/catalog should never be a competitive advantage unless it is your business.

Fred Wilson stated that if information wants to be free then where is the value in information? Unsurprisingly it is in attention. To quote, "there is a scarcity of attention and narrowing users’ data ‘experience’ to mitigate irrelevance is the future." Furthermore the ‘leverage points’ in the attention driven information model are Discovery, Navigation, Trust – ratings around content (page rank is good example), Governance, Values and Metadata – data about the data. The likes of Google, Yahoo and Microsoft have the first couple of these items well in hand but they will all increasingly need good meta-data that describes the content they are serving up. This is where aggregators/intermediaries step in whether it be tools, tv programs and movies, advertising or books.

He has provided a link on his web site to the presentation from this meeting.

Take all of Springer

Springer CEO Derk Hannk is quoted by Reuters suggesting the entire company is in play (Reuters)

The private equity firms Candover (CDI.L) and Cinven [CINV.UL], the owners of German academic publisher Springer Science and Business Media, are considering a full sale of the company, Chief Executive Derk Hannk said on Wednesday.

"For a while we were considered underleveraged, now we are considered overleveraged ... a straight sale is the preferred option," Hannk told Reuters on the sidelines of the Frankfurt Book Fair on Wednesday.

"We are owned by private equity and they have had a very good run for their investment for five, six years," he said, adding it may be time for new equity.

Ripplewood Gets Reader's Digestion

In November 1988, when Robert Maxwell's final offer for Macmillan, Inc was accepted, the bid priced the company at 19x earnings - a ridiculous multiple which made Macmillan management, the employee pension plan and shareholders wealthy but ultimately, brought down the successor company Maxwell Communications. Maxwell's financial arrogance didn't stop with the Macmillan, Inc win either as he had bankers and analysts chasing supposed take-over deals for McGraw-Hill and Paramount Communications (Simon & Schuster) into the early 1990s. Once the company came crashing down, Macmillan an expertly run $2.1billion publishing conglomerate, was broken up into innumerable pieces and sold off for far less than the multiple Maxwell originally paid.

Fast forward twenty years and the bankruptcy filing by Reader's Digest nicely bookends a period of media investment that is unlikely to be repeated. Media companies operating - to finance people - in a boring, slow-moving, but stable business segment, offered bankers a friendly place to put their money where they could be safe in the knowledge of stable earnings and small but incremental annual increases. This was true of banks and private equity funds that invested heavily in the publishing business over the past 5-10 years.

In comparing the Maxwell and Reader's Digest experiences, we don't appear to have learned enough. Maxwell was no manager and he surrounded himself with a cadre of sycophants and mediocre managers who effectively contributed to the company's demise. Maxwell was never going to out-skill the executive team that had re-built Macmillan during the 1980s, but no one understood that until it was too late. Similarly, Ripplewood has no background in media and chose to pay a significant premium for Reader's Digest which could only cripple the business if any one of their assumptions failed. At the time of the investment, Ripplewood was not investing in a stable management team that could compensate for their limited knowledge and perhaps provide some continuity; however, they did the next best thing and filled the RD executive suite with industry talent. Naturally, it took the team time to get settled.

As we now know, their timing couldn't have been worse as the global slump resulted in declining advertising revenues and a rate base cut. These macro issues effectively eliminated any time the company may have thought they had to sort out and understand a web-based ad model that could begin to compensate for the anticipated decline of the print magazine.

It is not as though Reader's Digest has stood still and some have wondered why CEO Mary Berner and her team are still in place. The most obvious reason would be that, operationally, Reader's Digest has made improvements and management's future plans and strategies not only make sense but represent a continuation of what has worked over the past two years. The company continues to add to their stable of impressive web properties which pre-date the acquisition, and management has also successfully launched new businesses and aligned themselves with new audiences around Rick Warren and Rachel Ray. It seems likely that more relationships are planned as the company attempts to migrate their audience both to a younger demographic and online.

Someone wanted to bet me a $1 that Reader's Digest would be back to the money trough within a year. I hope that is not the case and I won't take that bet. The company continues to have core strengths around their audience (sure, they are aging but they also continue to buy stuff), a wide array of web properties within which they can build communities and a revenue base that is more diverse than you might think. If they are successful and the group of banks can exit without taking any further write downs (I admit that's a horrible measure), the road will not have been easy to navigate. Here's hoping that Reader's Digest doesn't end up like Macmillan, Inc. and that perhaps private equity grasps some reality.

WSJ: Chapter 11 Is Next Page for Reader's Digest

PaidContent: Presentation to Bankers

Houghton Mifflin Harcourt Lose Credit Rating

Speculation about the financial health of Houghton Mifflin Harcourt took another turn for the worst when Moody's debt rating agency removed its' rating on HHM's debt. According to the report in the Irish Times the action by Moody's will impact virtually all the company's debt and it likely to both further raise the cost of their borrowing (although they were already at Caa3 with a negative note) and increase the expectation the company will default. From the Irish Times report:

Moody’s said that it took into account “the business risk and competitive position of the company versus others within its industry; the capital structure and financial risk of the company; the projected financial and operating performance of the company over the near-to-intermediate term, and management’s track record and tolerance for risk”.

Last month, Moody’s downgraded some of HMH’s debts to Caa3 from Caa1, and put it on a negative outlook. The move meant that it classed the company’s debts as high risk.

Earlier this year, long time HMH executive and current CEO Tony Lucki retired and was replaced by Barry O'Callaghan.

Springer On the Block

The Guardian is reporting that private equity owners Cinven and Candover are seeking 'strategic advice' from Goldman and UBS with respect to a possible sale of Springer Science. Springer Science and Business Media is the love child of a combination of Springer and Kluwer back in 2003. At the time, it is believed the private equity owners were attempting to roll up several properties (including Informa) in advance of a listing.

Where they are now will be difficult to ascertain. Today, their business could be fairly stable but most executives I speak to who have significant revenues in the academic, library and media segments believe that this coming year and 2010 will represent real tests just to keep revenues from falling off a cliff. Any publisher with 'second tier' products is going to face a torrid time keeping their subscription base. It is the subscription model that has helped many of these publishers weather the storm thusfar; however, this will not last as library and academic funds are slashed.

Candover and Cinven will face a difficult task and if they want £2bn as the Guardian suggests then this will be a big ask. Everyone is familiar with the protracted Reed Business auction that was ultimately abandoned and while this is a different market the example is indicative of the risk-averse nature of the M&A market for media properties.

From the Guardian article:

Rival private equity groups are regarded as the most likely buyers, although the head of one competing venture capital firm said he thought it was unlikely Springer would attract much interest, given the poor short-term prospects for the global economy.

Media companies have also seen their valuations fall in the wake of a global advertising downturn. However, unlike other media groups, many of which are heavily reliant on advertising, Springer has a relatively secure source of revenue. It publishes more than 6,500 new book titles every year and owns 60 publishing houses in about 20 countries in Europe, Asia and North America.

The company employs more than 5,000 people and its British operation, based in Surrey, oversees the publication of 20 journals.

Springer has been (from the outside) fairly innovative with respect to eBook and new publishing models. They were one of the poster children for the Google Book program and professed to have seen impressive sales results from many older titles that they had given up on years before. Perhaps, the eventual buyer will be taking as much a flyer on Springer as they will be on the potential for the wider market to turn around in the short to medium term. Good luck with that.

Reed Business Sale and Choicepoint

The Financial Times reports that the price Reed may get for the sale of RBI will be far below their original expectation of £1.25Bill. In the article they quote someone suggesting a sale price of £750mm with the expectation that a sale would go ahead regardless.

The deal's financing is now in place but the sticking point is the deterioration in trading at RBI into 2009 as the economy weakens. Reed would not comment on a lowest acceptable price.

One analyst said: "I think it is worth Reed's while to sell low. If RBI went for £750m rather than £1bn, all they lose is £250m of cash. While it is helpful to have that on the balance sheet, at the end of the day it is only £10m of extra interest.

"The alternative is that . . . the market automatically values RBI in the sum of parts at £750m-£800m anyway and you get left with a cyclical business that will see downgrades and will be under pressure for a couple of years."

There are three groups with a serious interest but the article does not indicate when a sale will be announced. Reed will be pressing for a resolution as soon as possible.

In other related news, the Federal Trade Commission is requiring that Reed divest some part of Choicepoint in order for approval of the acquisition to proceed. The FTC believes that the combination of the Reed and Choicepoint public record business would diminish competition significantly and as a result Reed is being required to sell a part of this business to Thomson West. (Link: From September press release)

To eliminate the anticompetitive effects of the proposed acquisition, the FTC will require Reed Elsevier to divest assets related to ChoicePoint’s AutoTrackXP and Consolidated Lead Evaluation and Reporting (CLEAR) electronic public records services to Thomson Reuters Legal Inc., within 15 days after the proposed acquisition is consummated.

Through its LexisNexis division, Reed Elsevier provides electronic public records services to law enforcement customers in direct competition with ChoicePoint’s AutoTrackXP and recently, ChoicePoint’s CLEAR, a new and advanced electronic public records service. Together, the two firms account for over 80 percent of the approximately $60 million U.S. market for the sale of electronic public records services to law enforcement customers.

“The proposed acquisition would have eliminated the intense head-to-head competition between LexisNexis and ChoicePoint that has lowered prices and led to product innovations for a critical law enforcement tool,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “The action announced today ensures that law enforcement customers will continue to benefit from this competition as they attempt to keep pace with increasingly sophisticated criminal activity.”

Informa Bid Disappoints

The Private Equity bidders looking to grab Informa have been told in no uncertain terms to sharpen their pencils. On the basis of initial interest that pegged the value of the company over £2.obillion, the formal offer made today is significantly lower. The Times reports that the Blackstone, Carlyle and Providence Equity bid of £1.87Billion is much lower than what management expected when they allowed prospective bidders to look at their books:

The source said: “Nothing at all has changed since July to make the company believe its worth has fallen so by so much. The board agreed to open its books at an offer of 506p and that is what they think it’s worth.”

Derek Mapp, Informa’s chairman, said: “The board believes that the revised offer significantly undervalues Informa. Informa has attractive future prospects and is continuing to deliver growth across the business even in the face of a weaker economic environment.” The company confirmed that it had continued to trade in line with its expectations. Shares in Informa closed down by almost 8 per cent at 414½p yesterday.

If a deal is to be done, then this consortium looks most likely to complete it; however, it is likely that negotiations will result in only a slightly higher price if the deal goes down. There doesn't appear to be any other bidders although having said that perhaps others on the sidelines will be encouraged by a slightly lesser price.

Informa Bid Likely to Go Ahead

Reuters is reporting that Carlyle has secured financing for the acqusition of Informa. From the report:

Carlyle and Providence have now assembled a group of around twelve banks to provide a leveraged loan of around 1.5 billion pounds that will finance the purchase, along with a large equity contribution, several senior bankers said. "On the Carlyle side the financing is in place. The financing is already largely done," a senior leveraged banker said.

The report goes on to suggest that a competing bid/financing package might be unlikely given that some of Informa's existing banks are included in the financial team Carlyle has organized and the general difficulty in getting financing for any deals is problematic at this time.

Bertelsmann Interested in Reed Business

Reuters reports that Bertelsmann's magazine unit Gruner & Jahr maybe in the mix to acquire the RBI unit from Reed Elsevier. Reuters learned of the tip via a German newspaper. In the report, Reuters also notes that indications of interest for the RBI business unit have been received and offers range between £1.0bill and £1.25bill. If correct, this range appears to match Reeds initial expectations for the deal. Reuters expects final bids to be submitted in October. Followers of Bertelsman may recall they have created a sizable fund with some PE companies with the express view to make some large (or one very large) deal. They objective was to be able to participate in the bidding process for these large media deals and not be priced out by pure PE deals. As a case in point they were very interested in the Cengage auction last year and by some accounts came quite close.

Reuters

McGraw Hill Plotting to Buy RBI

The Telegraph handicaps some of the interest in the sale of Reed Business information and offers the intreging notion that MGH would purchase the Reed titles. What they don't discuss is what would happen afterwards. As I have speculated, some assets are likely to be sold after a sales of RBI and this article compares the 'overlap' between the RBI titles and those currently owned by MGH.

The McGraw Hill Companies, owner of Standard & Poor's credit rating agency, has titles which overlap with RBI in aviation and construction. McGraw publishes aviation Week and a collection of architectural and engineering titles, while RBI has a large portfolio of construction titles including Construction News and Professional Builder.

And:

The sale of Reed Business Information (RBI), whose titles include film industry bible Variety, Flight International and New Scientist, began last week when information was sent to prospective bidders. If RBI fetches the asking price, it would be the biggest media takeover since the sale of Emap at the end of last year.

Jordan Edmiston Deal Report

JEGI just published their first half review of M/A in the media business. As most will realize, deal flow is off considerably at the top end of the market; however, JEGI has seen some resiliancy in the middle market.

From their press release:

M&A activity for the first half of 2008 was increasingly cloudy, but with continued bright spots in several areas, especially in the Online Media & Technology and Marketing & Interactive Services sectors, as well as in sub-$1 billion transactions. High-quality, innovative mid-sized companies continued to trade at a brisk pace, as diversified media and marketing groups, major technology companies, and private equity investors continue to participate in the “retooling” of the media and marketing services industries. In spite of economic pressures, ongoing turmoil in the financial markets, and concerns about consumer confidence, the total number of transactions for media, information, marketing services and related technologies increased slightly to 404, versus 397 in the prior year. Deal value, however, was down dramatically to $23.2 billion from $65.8 billion in the same period in 2007.

They also offer some consolidated highlights thus far on the year:

M&A activity in the first half of 2008 showed less than half the number of transactions for business-to-business magazines, compared to the first half of 2007. Deal value decreased 85% in 2008 from 2007 levels, as there was no transaction in this sector to offset VSS’s $1.1 billion acquisition of Advanstar in the first half of 2007.

* Consumer magazines also slowed significantly in the first half of 2008 in number of deals (down 38%) and value (down 82%), compared to the first half of 2007. In the first half of 2008, there were no transactions over $500 million in value, compared to Source Interlink’s $1.2 billion acquisition of Primedia’s Enthusiast Media group last year.

* The number of deals for the database and information services sector was up 29% in the first half of 2008. However, the first half of 2007 included Thomson’s $18+ billion acquisition of Reuters. Without this transaction, deal value for this sector would have nearly tripled in 2008 over 2007 levels.

* Half as many transactions occurred in the educational and professional publishing sector in the first half of 2008 versus the first half of 2007. 2008 includes JEGI’s sale of CQ Press to SAGE. However, total deal value was down considerably mainly due to the $7.75 billion acquisition of Thomson Learning by Apax Partners and Omers Capital Partners in the first half of 2007.

Haights Cross Sells Oakstone Unit

At the turn of the year, Haights Cross placed itself up for sale but as the capital market situation went from bad to worse a successful resolution has seemed increasingly out of reach. However, the company announced today that they have sold their Mediacal Information publisher Oakstone to Boston Ventures and they are also withdrawing from sale the two other Haights Cross business units. For their most recent reported full year, revenues for the Oakstone unit were $34mm. Terms of the sale have not been announced.

From their press release:

Haights Cross also announced today that it has suspended its previously announced plans to offer for sale its test-preparation and intervention business, Triumph Learning; and its audiobook publishing business, Recorded Books.

According to Paul J. Crecca, HCC President and Chief Executive Officer, “Earlier this year, we announced plans to offer for sale each of Haights Cross’ operating businesses. However, conditions in the capital markets, particularly in the leveraged finance market, remain challenging. With these factors, and considering the timeframe in which sale transactions could be completed, the HCC Board of Directors has concluded that the company should suspend the sales efforts for Triumph Learning and Recorded Books. We believe Triumph Learning and Recorded Books have leading positions in their respective market segments and represent attractive growth opportunities.”

Riverdeep Syndication Update

The Irish Independent is reporting that the banks supporting Riverdeep in its acquisition of Harcourt may be able to syndicate some of the debt they financed in the deal. The company had been saddled with over $7.0bill in debt but have reduced the debt by selling their college division for $600m. Credit Suisse the lead bank has sold down their senior debt and is now working on the secondary loan. The company also reaffirmed it will achieve operating efficiencies amounting to $320mm per year within three years from the combination of the operations of Houghton Mifflin and Harcourt.

From the article:

Credit Suisse is in the process of selling down EMPG's €1.7bn second-lien loan, which ranks behind a traditional senior credit facility in terms of security. "We expect this tranche to be fully syndicated by the end of the summer," said Barry O'Callaghan, executive chairman of EPMG in a letter to shareholders. "This demonstrates that, notwithstanding the current issues with credit markets globally, investors have sufficient confidence in our business model and prospects to purchase our debt."

Informa UBM Talks Collapse

After the close of the markets in the UK yesterday, UBM announced it had broken off talks about an all stock merger with Informa. Informa's shares have declined 7% this morning even though new potential buyers have emerged. Reuters cites a Times report suggesting Carlyle is behind a new bid but other parties Cinven, Apax, Candover are also potential entrants. At this point the most likely buyer would be Springer which is owned by Candover and Cinven. From Reuters:

A private equity consortium led by Providence is behind the latest bid approach to British media group Informa (INF.L: Quote, Profile, Research), media reports said on Wednesday. The Times newspaper, without citing sources, said that private equity firm Carlyle was part of the consortium and that talks were at an early stage.

Analysts must also be wondering what type of deal UBM would do if this one wasn't to its liking. The company has remained on the sidelines for much of the media buying frenzy of the past several years. It has no debt to speak off but it remains relatively small. Under what circumstances would they consider expanding the company?

Reed Business to be Broken Up

PaidContent cites inside knowledge that the RBI sale will be broken into bite size pieces.

We have also learned that Reed Elsevier has changed its mind on how to sell it. Initially it did not want to sell off various pieces separately, but now at least the U.S. part, RBI-US, will be sold off separately, and multiple parties are aligning their arrows for when the process starts.

In my opinion, in the US we will see a group of PE partners join to buy the entire US segment and then carve this up subsequently into smaller chunks. The RBI media titles represent one such chunk which I have mentioned before.

The Sell Out Of Borders

Ever get your mortgage banker to knock 25% off your interest rate? Me either. Not so those intrepid financiers at Borders. In announcing the loan rescue on their conference call, they professed due diligence seeking the best terms "under the circumstances" (what those are remain a mystery); they have now managed, no more than ten days later, to reduce their interest rate from usury 12% to a 9% rate beloved of Shylock: "Three thousand ducats for three months."

Pershing Square, the largest shareholder in Borders and the provider of this financial rescue package still retain all the advantages they had before they lowered the rate. They wouldn't have done this unless someone else offered up a better rate but even so as an insider they always had the advantage. What is troubling is that the 'due diligence' that should have occurred upfront to get the best rate clearly never happened. And remember, it is still not clear that this financial lifeboat was even necessary. The financial 'crisis' was news to every analyst that follows the company on behalf of their investors.

Great news however for all the managers at Borders since they have been able to provide a safety net for themselves. Stay bonus's galore: "For positions at the executive vice president level and above, the threshold, target and maximum bonus opportunities under the Bonus Plan as currently in effect are established at 20%, 80% and 160% of salary, respectively." This enhancement to their existing bonus plan only applies to four executives. Two of which - Jones and Wilheim (CFO) aren't going anywhere and one of the remaining is head of HR and with all due respect what is important about his contribution to the financial health of the company? And that leaves aside the question why no one lower than EVP has a package. Jones also got more options and is already in the money. There are many more insider transactions noted from last week and there was a lot of volume at the open on Monday. The stock closed at $6.54 up 6% on the day.

The company also indicated they would hold off filing their 10K.

SEC filings on Monday also saw a new strategic investor enter the fray. Gerald Catenacci who owns Highway Partners equity fund has acquired 5% of the company. Reuters also reported the news and notes no reason has been given for the investment. He evidently has something with roads: Highway, motorway, expressway, freeway are all names of investment vehicles (oopps). There doesn't appear to be any relationship between Highway and Pershing.