Vivendi Looks to Shed Debt

Houghton Mifflin on the Block

Paris-based Vivendi Universal SA grew fast amidst a two-year buying spree by former chairman Jean-Marie Messier. Unfortunately, so did the company's debt. Messier was subsequently fired in July, and on August 14, Messier's replacement, Jean-Rene Fourtou, announced that the company is looking to shed some of its 19 billion euros in debt: First on the block -- U.S. publishing giant Houghton Mifflin.

"We must decrease debt of [10 billion euros] as soon as possible," Fourtou said. "We are committed to see assets for a minimum amount of 10 billion euros in the two years to come, five billion euros of which will be completed during the next nine months." He then laid out a number of ways this commitment could be achieved by the company, one of which, he explained, is "the sale of Houghton Mifflin, for which we have numerous potential buyers."

Vivendi began as a water company, but former chairman Messier sought to transform the company into a media giant to rival the likes of AOL Time Warner, Inc. Toward that end, Vivendi bought Houghton Mifflin in 2001 for $2.2 billion in cash and assumed debt, as reported by Bloomberg.co.uk.

Under Messier's leadership, the company became one of the largest media conglomerates in the world, listing the Telecoms Group and the Universal Music Group among its assets. However, while the company grew, it also racked up enormous debt. In July, the company ousted Messier and hired Fourtou. Upon taking over as chairman, Vivendi's board ordered Fourtou to "propose a strategy to enhance the value of the stock and to fix the important financial issues of the company," he said yesterday.

Now, with Houghton Mifflin on the block, there is much speculation over who will buy the publishing giant and for how much. Analysts predict that it is unlikely that Vivendi will recoup the acquisition price due to the decline in media valuations since the purchase, Bloomberg.co.uk reported.

And though Fourtou said there are potential buyers for Houghton Mifflin, he did not name any. Both Crain's New York Business and Bloomberg.co.uk said industry experts predict there could be interest from educational publishing giants, such as the Manhattan-based McGraw-Hill Co., Reed Elsevier, or Pearson. However, these companies would not likely be able to buy the entire Houghton Mifflin unit due to antitrust issues, the articles point out. Nonetheless, McGraw-Hill and Pearson are said to be interested in Houghton's professional testing and certification business, CAT*ASI, a small though fast-growing part of the market, the Crain's article noted.