Textbook publisher buyout could impact book buyback rates

By Mark Jewell
Associated Press

Houghton Mifflin Co. on Wednesday agreed to a nearly $1.8 billion buyout that will pair a venerable name in educational textbook publishing with Riverdeep Inc., a smaller firm whose complementary strength is in educational software.

By joining Houghton Mifflin’s paper-and-ink business with Riverdeep’s core strength in electronics, the newly formed venture hopes to better position itself against larger rivals Pearson PLC, McGraw-Hill Cos. and Harcourt Education.

Barry O’Callaghan, Riverdeep’s chairman and CEO, said the transaction seeks to “capitalize on the convergence of print and digital education platforms” and help Riverdeep draw strength from Houghton Mifflin’s larger sales force.

The buyers, a newly formed holding company called HM Rivergroup PLC, are led by O’Callaghan, a former investment banker from Ireland and a controlling shareholder of San Francisco-based Riverdeep.

After the deal’s expected completion by the year’s end, the new holding company will be based in Ireland and be renamed Houghton Mifflin Riverdeep Group PLC.

Houghton Mifflin, the fourth-largest textbook publisher in the United States, traces its origins to 1832. It was home to early American authors such as Ralph Waldo Emerson and Henry David Thoreau, as well as J.R.R. Tolkien.

Wednesday’s transaction was the latest in a string of ownership changes for Houghton Mifflin, which was acquired by French media and telecom company Vivendi Universal SA in 2001 for $2.2 billion, including $500 million in assumed debt. The next year, Vivendi sold Houghton Mifflin for $1.28 billion to Thomas H. Lee and Bain Capital, two Boston firms that also agreed to assume $380 million of debt.

Riverdeep was founded in 1995, and underwent a management buyout led by O’Callaghan in 2002.

Riverdeep’s Web-based and CD-ROM course materials include its flagship product, called Destination Success. The firm has recently added education products from such names as The Learning Company, Broderbund and Edmark.

Susan Bartel, head of Fresno State’s Kennel Bookstore’s textbook department, noted that educational software has its drawbacks.

“Publishers have really figured it out this time with putting CDs in books that only allow access on the first computer they’re loaded on to,” Bartel said.

Also, when publishers release new editions, particularly versions with CDs, the demand for the older editions is eliminated. The new editions also prevent the bookstore from buying the textbooks back from students at the end of a semester.

Fresno State senior Sarah Pittman said she has experienced this at the end of every semester that she’s tried to sell her books back.

“They usually will buy back my books, but it seems like they never give even 50 percent of the price,” Pittman said. “Last semester, I didn’t have the CD that came with one of my books, and they wouldn’t even buy it back.”

Brendan Evans, who recently received his bachelor’s in economics from Fresno State and plans to attend graduate school soon, said he thinks the university should encourage professors to not purchase new editions of textbooks if it’s not necessary, and that the bookstore should try to give students a better percentage on buyback.

Associated Press writers Shawn Pogatchnik in Dublin and Jay Lindsay in Boston contributed to this report.

Shannon Milliken and Ryan Borba contributed to this report.

Comment on this story in the News forum >>