News Corp to buy Houghton Mifflin Harcourt’s consumer-publishing arm for $US349m

News Corp’s $US349m purchase of the consumer arm of Houghton Mifflin Harcourt adds high-profile novels to its publishing division.

News Corp CEO Robert Thomson says “timeless writing is a timely source of revenue”. Picture: AFP

News Corp has agreed to buy the consumer arm of educational publisher Houghton Mifflin Harcourt for $US349 million, marking the media company’s second deal in less than a week.

The deal adds a portfolio of high-profile novels from authors such as George Orwell, Philip Roth and J.R.R. Tolkien to News Corp’s HarperCollins Publishers division. The Wall Street Journal on Sunday reported that the companies were nearing a deal.

The sale would allow Boston-based Houghton to pay down debt and focus on its digital-first strategy in education, goals that the company had set when it put HMH Books & Media on the block last fall.

The deal indicates that New York-based News Corp, which in addition to HarperCollins owns Wall Street Journal publisher Dow Jones & Co. and news organisations in the UK and Australia including The Australian, among other assets, is looking to expand through select acquisitions after a period of slimming down through sales of noncore businesses.

“Timeless writing is a timely source of revenue and the potential to create highly profitable audio and video works flourishes with each passing digital day,” News Corp chief executive Robert Thomson said.

News Corp is focusing investments on growth areas including books, digital real estate, and the Dow Jones unit, a person familiar with the situation said.

HarperCollins expects cost savings of more than $US20 million annually within two years, including in manufacturing and distribution, out of the deal, News Corp said. The companies expect the transaction to close in the second quarter.

News Corp said on Thursday that it had agreed to buy Investor’s Business Daily for $US275 million, adding another publication catering to investors to its portfolio. The Dow Jones unit, which also publishes MarketWatch and Barron’s, will operate Investor’s Business Daily.

Last year, News Corp moved to sell its coupon-publishing unit News America Marketing and video-advertising platform Unruly.

News Corp shares have risen sharply since. At about $US26, they are nearly triple the level where they were a year ago.

HarperCollins has been a strong performer during the pandemic, which helped propel book sales. In its most recent quarter, the unit posted a 23 per cent growth in revenue to $US544 million and 65 per cent jump in profitability to $US104 million.

Houghton’s consumer-publishing unit generated revenue of $US191.7 million in 2020, accounting for approximately 19 per cent of Houghton’s net sales. Other core properties of HMH Books & Media include the Peterson Field Guides, which cover topics ranging from birds to fish to wildflowers; lifestyle titles from Martha Stewart; and the Carmen Sandiego franchise.

HMH Books & Media owns a substantial children’s catalogue that includes the “Little Blue Truck” and “Curious George” series, and other favourites such as “The Polar Express” and “Jumanji.” It boasts a strong line of cookbooks that includes titles by Jacques Pépin, Mark Bittman and Priya Krishna.

Shares of Houghton have underperformed the broader market since 2015, when the company bought Scholastic Corp’s educational-technology business for $US575 million in cash. The Scholastic deal was part of an effort to bolster Houghton’s digital-education business.

The deal would mark the second sale of a well-known publisher in less than six months. German media giant Bertelsmann SE, which owns Penguin Random House, last November agreed to buy Simon & Schuster from ViacomCBS Inc. for almost $US2.18 billion. That deal is expected to close later this year pending regulatory review. Last week, a UK watchdog said it was reviewing the proposed acquisition.

Wall Street Journal