Buyout firms circle €2bn Reed Elsevier division(2)

Private equity firms are amongst the favourites to buy the education arm of Reed Elsevier, after the publishing company said it was putting the division up for sale.

Private equity firms are set to do battle with trade buyers for the education arm of Reed Elsevier, valued at about €2 billion ($2.6 billion), which was put up for sale by its parent company yesterday.

Sir Crispin Davis

Sir Crispin Davis, chief executive of Reed Elsevier, said at a press conference yesterday that there would be “strong interest” from private equity buyers in the Harcourt Education business, which is currently valued at about €2 billion.

Reed said on Thursday it had decided to sell the Education division, since “its business dynamics and strategy have increasingly differed from the other three divisions”. A sale would allow the firm to “sharpen its strategic focus to best capitalise on growing digital opportunities in its key markets of Science and Medical, Legal and Business”.

Trade buyers are also expected to participate in the auction. The Financial Times reports that Barry O’Callaghan, the ex-Credit Suisse banker who runs Riverdeep Holdings, is considering an “audacious” £2 billion bid. Riverdeep recently completed the highly leveraged $5 billion acquisition of Houghton Mifflin, a US educational publisher previously owned by private equity firms Thomas H Lee, The Blackstone Group and Bain Capital.

Several other buyout firms also have experience in the sector and may be possible bidders for Harcourt.

Apax Partners owns a number of publishing assets: last year it bought UK-based Incisive Media, while exiting its investment in MediMedia, the former healthcare division of Vivendi Universal Publishing which it co-owned with Cinven and Carlyle. It was also one of the final round bidders for the TSL Education business previously owned by News International, as was Candover, but both firms eventually lost out to Exponent Private Equity. US media specialists Veronis Suhler Stevenson, which bought Granada Learning from ITV for £53 million last April, could also be involved in a bid team.

Interest in the sector is clearly rife, and Davis said the initial reaction had been encouraging: “Nothing is certain, but the advice we are getting is positive. Education assets are sought after. There is high demand. Bankers expect to be talking to a lot of buyers.”