The Bookseller.com

3rd December 2008

Tom Tivnan is the features editor of The Bookseller. He will be blogging about the magazine's in depth coverage.

Making a dent in Riverdebt

04.12.07

Another month, another deal for Houghton Mifflin Riverdeep worth hundreds of millions of dollars.

This time the educational publisher and software company is selling rather than buying. On 3rd December it reached an agreement with Cengage Learning (the publisher formerly known as Thomson Learning) to shed its US higher education textbook division Houghton Mifflin College for USD750m. This puts a dent, however slight, into Riverdeep's rather mountainous debt of about USD7.4bn, accumulated by its reverse takeover of Houghton Mifflin and Reed Elsevier's Harcourt business.

Debt is not a trifling concern for HM Riverdeep. In July it reported that its interest bill following the Harcourt deal was more than USD400m a year. Earlier this month, the company was purportedly set to syndicate USD7.15bn of its debt, a move that has been quashed the ongoing credit crunch.

At first glance, then, selling on  HM College looks a like pawning the family silver when you are down a few bob (or quite a few bob). But it is a rather wise move and has probably been on the cards for some time. Riverdeep began as a schools educational software provider and the HM College higher education sat uncomfortably with the rest of its portfolio, particularly after the Harcourt deal. The company can now focus on what has always been its core business of e-learning services and schools publishing.

And, particularly in the US with lucrative schools contracts to be had, education is also where the money is.  The added heft of Harcourt only increases Riverdeep's chances of muscling in on market leaders Pearson and McGraw Hill.

The American HE textbook market is a bit more robust than the UK's but it could still probably be called static at best.  Shedding HM College is astute move.