Vivendi Woes Roil Foreign-Dominated Textbook Sphere
Little more than a year after it was acquired for $2.2 billion by a French media company, the educational publisher Houghton Mifflin Co. now bears a sign that says: À Vendre. That's "for sale," in French.
eIts parent, Vivendi Universal SA, has faced a financial crisis over the past several months and needs cash. So in August, after it had first reassured employees that Houghton Mifflin would not be sold, the Paris-based conglomerate reversed course and put the publisher on the block.
Then, potential suitors expressed interest not just in Boston-based Houghton but also in buying the rest of the division known as Vivendi Universal Publishing. The larger unit controls a variety of publishing properties in Europe and Latin America as well as Houghton Mifflin.
Vivendi's saga, including dramatic boardroom maneuvering to oust the company's colorful chairman, Jean-Marie Messier, has unfolded on the business pages since midsummer. And in France, the potential sale to foreign interests of Vivendi publishing assets, among them French textbooks and a popular French dictionary, has led to a cultural call to arms.
But in the United States, yet another impending change in control for one of the four dominant textbook publishers has been met mostly with shrugs.
"U.S. schools may or may not be aware of the parentage of their textbook publishers, and they probably don't care all that much," said Peter P. Appert, a media and education analyst in the San Francisco office of the investment bank Goldman Sachs & Co. "It's all about the product itself."
Houghton Mifflin executives say that while they are following the corporate twists and turns closely, they have had no choice but to try going about business as usual.
"When I signed on, which was well before the summer, I knew Vivendi's balance sheet was not in great shape, and there would be some turmoil," Hans Gieskes, the chief executive officer of Houghton Mifflin, said in an interview last week. "I did not expect this much excitement. But things happen in life for a reason."
Mr. Gieskes, a Dutch national, took over as CEO on July 1, just as Vivendi Universal's financial crisis was boiling over. He had worked for many years for the Anglo-Dutch media company Reed Elsevier Group PLC, which acquired the U.S. textbook publisher Harcourt last year.
Houghton Mifflin, with estimated educational sales last year of about $900 million and total revenue of about $1.3 billion, is considered by most industry observers the fourth-ranking U.S. textbook publisher, behind Pearson Education, McGraw-Hill Education, and Harcourt. ("Education Publishers," this issue.)
But Houghton Mifflin recently did well in California's adoption of elementary reading materials, and the company is concentrating on maintaining its reputation in American schools.
Vivendi's troubles "haven't had much effect at all in our day-to-day running of the business," said George Logue, the executive vice president in charge of Houghton's K-6 school division. "In the last five to eight years, virtually every publisher has been through something like this."
Besides recent foreign acquisitions of Houghton Mifflin and Harcourt, the British media giant Pearson PLC created a major player, Upper Saddle River, N.J.-based Pearson Education, by acquiring the educational assets of the American publisher Simon & Schuster in 1998.
Peter Jovanovich, the chief executive of Pearson Education, said foreign ownership of textbook publishers has not been much of an issue in the United States because educators are still buying from the same American sales force, and the books are still written and edited here.
"What does it mean to be foreign-owned?" he said. "It means your stock is traded on the London Stock Exchange."
The largest shareholder of Pearson PLC is an American investment fund, he noted. And shares of Pearson, Vivendi, and Reed-Elsevier are all traded on the New York Stock Exchange in addition to various overseas markets.
Although some rue the consolidation of publishing houses in recent decades, American customers and observers of the textbook industry do not get overly exercised about the increase in foreign control.
"It really has no impact on us," said Jim White, the manager of the textbook office in the South Carolina education department. "We have an adoption process we go through, and if the publishers meet the requirements of the law, they're entitled to bid."
Gilbert T. Sewall, the director of the American Textbook Council, a New York City-based group that critiques publishers' offerings, said he's "astonished that Houghton Mifflin is back on the block after a year."
But foreign ownership is "not something I stay up nights worrying about," Mr. Sewall said. "Maybe it's because everyone is now looking at publishing as a global enterprise."
Most of the big U.S. publishers and their parents are active players in the world market for textbooks and other educational materials. As the companies grow bigger, some are leaning toward unifying their offerings under a single brand name.
Pearson is getting ready to launch just such a branding push, which could result in its venerable imprints such as Scott Foresman and Prentice Hall taking a back seat to the Pearson name.
"There is a sense that educators are buying from so many sources that they don't always know [what corporation] they're buying from," Mr. Jovanovich said. Educators wonder how the company's texts, testing, and technology products work together, he added.
"We're trying to knit the company together a lot more closely," he said.
The future of Houghton Mifflin's brand identity is somewhat clouded by the uncertainty over Vivendi's sale of its publishing unit. Once suitors expressed interest in all of Vivendi Universal Publishing, Vivendi's management welcomed bids for the whole unit, minus a game-development division.
But the sale process has been complicated because of French cultural sensitivities. Last month, France's cultural minister, Jean- Jacques Aillagon, said that any purchase of the publishing unit in which U.S. investment funds were dominant could run into objections from his government. He said that France's president and prime minister shared his concerns.
The French are especially sensitive to what they view as the creeping American influence on their language and culture. Among the key French properties owned by Vivendi's publishing unit are the Larousse dictionary and Le Robert reference books. The cultural concerns prompted Vivendi to seek deals that came with assurances that certain French assets would remain under French control.
The company is reported to have received bids for Vivendi Universal Publishing in the neighborhood of $3 billion from at least two consortia that include both American and French buyout firms. The other big educational publishers have not bid because they believe that acquiring Houghton Mifflin wouldn't pass antitrust scrutiny.
Observers have pointed out that no one in the United States appeared agitated that Vivendi's acquisition of Houghton Mifflin last year brought with it the American Heritage Dictionary, which is published by Houghton's trade division.
Marjorie Scardino, the chief executive of Pearson PLC, pointed out in a meeting with analysts last month that while many countries represent fertile ground for expansion for the big British and American educational publishers such as Pearson, France was not one of them.
"The French really don't welcome other nationalities as publishers for their schoolchildren," she said.
Vol. 22, Issue 6, Page 8Published in Print: October 9, 2002, as Vivendi Woes Roil Foreign-Dominated Textbook Sphere