Borders International Update

Borders announced in March that they were reorganizing their store operations and would be divesting most of their international operations including the UK stores which they (mostly) acquired via the purchase of Books etc. In other parts of the world particularly in SE Asia and Australia/New Zealand, Borders built their brand in these markets from scratch. Initially the growth was slow: They only had a store in Singapore for a few years; however, by 2002 store development in Australia was in full swing. Things seemed to be going so well that Borders opened several new stores in New Zealand in the week before they announced that they we getting out of the international business.

In my old home town newspaper this morning, The Age confirms that private equity firm Pacific Equity Partners is actively interested in purchasing the Borders stores and naming rights in the Australia/New Zealand market. The book retail market in Australia is dominated by two retailers. Angus & Robertson, which is now owned by PEP, was owned by WH Smith and numbers about 180 outlets. A&R stores are predominately corporate owned. Dymocks is the other chain retailer and most of their stores are franchised. Leading Edge is a ‘consortium’ of independent retailers that have joined together to aid in business negotiations and enable technology development.

(On a related note, Readings a Melbourne independent retailer and customer of Global Books In Print for many years, won chain bookseller of the year in 2006 even though they only have about five stores. Mark Rubbo the owner has consistently won independent bookseller of the year for many years and successfully battled against a Borders superstore that opened across the street from his main store).

PEP is interested in expanding Borders across the market and will do so without merging the brand with A&R. A&R also own Whitcoulls in New Zealand and PEP appear to recognize that there is room in that market for both brands as well. The Age article also notes that Borders management are also trying to interest private equity in fronting a bid. It would seem likely that some accommodation will be made since the management will be vital to the continued performance and development of Borders in Australia.

Related:
What Borders Could Have Said
Borders Reports Their Strategic Plan

(Thanks to my Aussie stringer for the article).

Sting's Lyrics in Book Form

I had this idea last year that compendiums of an artists lyrics would make an interesting book product although I also suggested that including reflections on what the songs meant, what was going on with the artist/band at the time and some autobiographical material would round out the titles. I have read two books from the Continuum series of mini-books on seminal albums and they are quite interesting but one dimensional. Really long essays written by music critics they speak about the construction of the album and the songs on it as well as some of the circumstances surrounding the recording. My thought was that this concept would be more interesting if presented by the artists that wrote and performed the music.

The AP via the Miami Herald is reporting that all Sting's lyrics will be presented in book form and published by The Dial Press. The press release suggests that there may be some accompanying text with the lyrics however it is not specific on that point.

Some other suggestions: Hiatt, Thomson, Young, Waits, Wilson, Townshend, Armstrong, Lovett, Gallagher(s), I could go on...

Weekly Update

Deal News:
Thomson Learning Sale said to Encourge Share Buy-Back: Globe

Publishing:
About Book Reviews Sections: HuffPo
One Billion E-Books From Ingram: PR
LexisNexis Teams with Elsevier: PR
SilverChair and MGH announce Pharmacy Platform: PR
Elsevier Extends ScienceDirect ArticleChoice: PR
Elsevier Selects Rightslink: PR
McGraw Hill report first Quarter: PR
Edgar Award Winners: PR
Wiley in India: IHT

Other News:
Swets/Muze Glabal Announcement on Fed Search: PR
Generate, Inc. Announce tool For in Context Content Distribution: PR
OCLC Announce WorldCat Local: OCLC

Sports:
Whinging Cry Baby: BBC

Pearson 2007 Guidance

Pearson reaffirmed their guidance for 2007 and said the strong performance they had in 2006 was continuing into the early part of 2007. Strong adoption results and uptake from their new electronic online learning and assessment programs in Higher Ed and good performance from Penguin were largely responsible for the results. In summary their press release presented the following information:

• School to achieve underlying sales growth in the 4-6% range with margins improving;
• Higher Education sales to grow in the 3-5% range with stable margins;
• Professional revenues to be broadly level with margins improving;
• Penguin margins to improve further, as our publishing investment and efficiency programmes continue to bear fruit;
• Financial Times Group profit to grow strongly with our cost measures, integration actions and revenue diversification pushing margins into double digits at FT Publishing. IDC revenues to grow in the 6-9% range with net income growth in the high single-digits to low double-digits (headline growth under US GAAP).

Scardino is confident of "another good year for Pearson" so on the back of a record breaking year in 2006 the question will be how much they exceed the results of 2006.

Also of note, shareholders at the AGM approved a buy back program.

Press Release
Reuters

Thomson Reports 1st Q

Thomson reported an 11% top line gain and an 8% operating profit gain to start off the year. Organic revenue growth was 6% led by the Legal, Tax and Accounting unit. Diluted EPS was up 14c to 35cents versus the same period last year. The quarterly operating results encourage the notion that this is a very financially strong business with cash flow up 25%, significant investments being undertaken in new intitiatives and a closely managed cost structure. Furthermore, Thomson are bullish on the future:

The business outlook for 2007 that was provided on February 8, 2007 remains unchanged. Revenue growth is expected to be at the high end of the company’s long-term target range of 7%-9%, prior to the deployment of the proceeds from the sale of Thomson Learning. Operating margin is expected to be at or above 2006 levels, despite increasing investments in efficiency initiatives. Cash generated by continuing operations is expected to grow, excluding cash generated through deployment of the Thomson Learning sale proceeds.

Thomson expects its performance to further strengthen in 2008. The company expects to sustain its long-term revenue growth rates; operating margin is expected to increase to above 20%; and free cash flow is expected to strengthen, as improvements in operating performance are projected to more than offset the loss of Thomson Learning’s free cash flow, even before deployment of the Thomson Learning sale proceeds.

Here is the press release.

In discussing the pending sale of the learning unit CEO Harrington said:

"The Thomson Learning sales process is on schedule and has attracted a very high level of interest from prospective buyers. We anticipateannouncing a buyer at the end of the second quarter and closing thetransaction in the third quarter. We will use the proceeds from the sale topursue opportunities aligned with our growth strategy and business model.We will be disciplined in reinvesting the proceeds and will focus onopportunities that drive growth and create value for shareholders."

The company did not break out financial results from the Learning group which is classified as discountinued operations other than to show consolidates earnings up $82mm over last year. It is hard to draw any conclusions from this given the limited detail however.

Here are the slides from their financial presentation.

Computers In Libraries

The conference was in Virginia last week and here is a great summation of some of the sessions from John Dupuis (Confessions of a Science Librarian).

Thomson and Harcourt Reunited Again?

There was an interesting suggestion doing the rounds in London this week (Reuters) suggesting that the prospects for Thomson Learning and Harcourt Education would be better if the businesses were combined by one purchaser. The discussion started in an article in the UK Sunday Telegraph which pointed out that the businesses were once part of the same operating company and that at least two of the private equity groups looking at these companies are looking at both of them.

Thomson Learning and Harcourt were part of the same group until 2000, when Harcourt General was bought by Reed. Reed kept the school textbook and testing division and Harcourt's science and medical titles but sold the higher education arm to Thomson Corporation, the Canadian publisher.

The combination could result in additional competition for Pearson and McGraw Hill which retain both School and Higher Ed businesses. While the school and college businesses operate in definably different environments and are generally managed separately within the larger organizations, the scale opportunities could generate millions in additional operating profit were the businesses combined. Coupled with the imperative to create digital delivery platforms for their content and this combination may make some sense.

It will be interesting to see the strategy employed by the bidders. The Thomson auction is expected to be completed first but would one firm try to preempt the bid process for Harcourt to secure that company in advance of the Thomson process? Having secured Thomson, will Reed benefit financially if the sale price for Harcourt contains some 'combination' bonus based on savings the purchaser expects to receive with a combined business? Regardless, it will be a long while until the opportunity to combine two educational publishers of this size comes again so I suspect some pencils are being sharpened as we speak.