HarperCollins (News Corp) is Acquiring Houghton Mifflin Harcourt Books & Media Segment For $349 Million in Cash

From News Corp:

News Corp announced today that it has entered into an agreement to acquire the Books & Media segment of Houghton Mifflin Harcourt (HMH Books & Media). The business will be operated by HarperCollins Publishers, a News Corp subsidiary.

HMH Books & Media is home to one of the most extensive and successful backlists in the publishing industry, with a history of strong profitability. Backlists have proven to be a sustainable and growing source of revenues, high margins and cash flow for publishers, particularly evergreen properties with broad, enduring and global appeal. In calendar year 2020, over 60% of HMH Books & Media revenues were generated by its formidable backlist.

Among the most popular of the more than 7000 titles in the HMH Books & Media backlist are: The Lord of the Rings trilogy and other titles by J.R.R. Tolkien; 1984 and Animal Farm by George Orwell; and All the King’s Men by Robert Penn Warren, among many others. HarperCollins currently has rights to J.R.R. Tolkien’s works in the British Commonwealth.

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HMH Books & Media is being acquired by News Corp for $349 million in cash and the acquisition is subject to customary closing conditions, including regulatory approvals. In calendar year 2020, HMH Books & Media had strong growth with net sales of $191.7 million, and Adjusted EBITDA of $26.6 million, based on public filings.

HarperCollins expects to realize immediate cost savings, accumulating to more than $20 million annually within two years, including manufacturing, distribution and other cost efficiencies. HarperCollins also anticipates revenue synergies by leveraging its global scale and further expanding licensing opportunities. The acquisition is expected to close in the fourth quarter of fiscal 2021.

HMH Books & Media has a thriving Productions business which repurposes its popular brands across media platforms.  HMH Productions is involved in the animated series Carmen Sandiego on Netflix, which will also be a live-action feature film, and has other television projects currently in development.

The acquisition will include the business’s extensive children’s and young adult divisions, which publish such classics as: Curious George; Martha Speaks; Five Little Monkeys; The Polar Express; the Little Blue Truck series; Mike Mulligan and His Steam Shovel; The Little Prince; and Stellaluna. Works by young adult authors, including Lois Lowry, author of The Giver, are also a strong part of the HMH Books & Media catalogue.

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HMH Books & Media has a flourishing audiobooks business, launched in 2019, which is expected to add value to HarperCollins’s own large and growing audiobook revenue stream.

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HarperCollins Publishers is the second-largest consumer book publisher in the world. In the most recent quarter, ending December 31, 2020, HarperCollins had strong revenue growth across every category, with revenues increasing $102 million, or 23%, compared to the prior year. Digital sales increased 15% compared to the prior year, driven by growth in both e-book and downloadable audiobook sales. Segment EBITDA for the quarter increased $41 million, or 65%, compared to the prior year.

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More From the NY Times

Book sales across the industry have remained strong during the pandemic, but Houghton Mifflin saw its revenue fall sharply last year because of a steep drop in sales in its education division. Its revenue fell by more than 46 percent in the nine months that ended on Sept. 30 of last year, compared with the same period in 2019. The company put its trade publishing division up for sale last fall, as it aims to focus on its core business of K-12 educational publishing, and to pay down its debt.

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