Private equity trio to sell educational publisher

Thomas H. Lee, Bain Capital and Blackstone have agreed to sell Houghton Mifflin for $3.4bn to a newly formed Irish public limited company.

A private equity consortium consisting of Thomas H. Lee Partners, Bain Capital Partners and The Blackstone Group has agreed to sell Houghton Mifflin Holding Company, a Boston, Massachusetts-based publisher of educational materials ranging from textbooks to reference books, as well as fiction and non-fiction books, to a new Irish public limited company, HM Rivergroup, for approximately $3.4 billion (€2.6 billion), Blackstone said in a statement.

The purchase price includes $1.8 billion in cash and the assumption of $1.6 billion in net debt. Some members of Houghton Mifflin’s management team and will “roll over” $40 million of equity into HM Rivergroup, the statement said.

Tony Lucki, the chairman and chief executive officer of Houghton Mifflin, will serve as HM Rivergroup’s chairman, the statement said. He will maintain his position as chairman, president and chief executive officer of Houghton Mifflin Company.

Thomas H. Lee, Bain Capital and Blackstone bought Houghton Mifflin from Boston-based Vivendi Universal, a creator and producer of entertainment, education and personalized services, for approximately $1.66 billion in December of 2002.

In a related deal, HM Rivergroup will also acquire Riverdeep Holdings Limited, a US-based publisher of interactive, education-related products, including the programs The Print Shop, Reader Rabbit and Kid Pix, the statement said. The $1.2 billion transaction value includes the assumption of debt. Barry O’Callaghan, HM Rivergroup’s executive chairman, is also the chairman and chief executive officer of Riverdeep. He became the company’s CEO in 1999.

Upon the completion of the transactions, which are expected to close before the end of the year, approximately 50 percent of HM Rivergroup will belong to O’Callaghan and the management team and approximately 15 percent will belong to Riverdeep’s former shareholders, the statement said. The remaining 35 percent will belong to new investors.

Founded in 1985, Blackstone made the largest private equity deal ever earlier this month when it took over Sam Zell’s Equity Office Properties Trust, the largest publicly traded owner of offices in the US, for $36 billion, including the assumption of $17 billion of debt.

Thomas H. Lee and Bain Capital, both based in Boston, partnered up earlier this month to acquire the media giant Clear Channel Communications for approximately $26.7 billion. The two firms have also shared investments in brand name companies like Dunkin’ Brands and Warner Music Group.