US firms set for Vivendi division

Thomas H Lee and Blackstone Group have emerged as frontrunners for Vivendi’s $2bn US publishing arm.

US private equity firms Blackstone Group and Thomas H Lee Partners have teamed up to mount a bid for Houghton Mifflin, the US publishing arm of Vivendi Universal.

The joint bid is one of a number of private equity propositions being considered by Vivendi as the firm looks to execute a E10bn debt reduction programme.

The proposed sale of Houghton Mifflin was announced earlier this summer, less than a year after Vivendi acquired the Boston-based publisher. Both US firms had expressed an interest in the publisher last year and are likely to submit offers in the $1.5bn to $2bn bracket, a discount of more than ten per cent to the price paid by Vivendi.

The Financial Times reports that Bear Stearns, the investment bank, has valued Houghton Mifflin on an earnings multiple of 6.4 times its estimated 2002 profits – equivalent to a E1.6bn price tag. However Credit Suisse First Boston, advisors to Vivendi Universal, are hoping for a higher price.

The transaction, which is likely to be completed by the end of the year, will be the second such deal completed by a private equity consortium in 2002. In April, UK buyout firm Cinven led the private equity-backed acquisition of the healthcare and business publishing activities of Vivendi Universal in a E1.2bn deal – some way below Vivendi’s original E2bn asking price.

Thomas H Lee and Blackstone previously joined forces for an ultimately unsuccessful bid to acquire Burger King, which eventually went to the Texas Pacific consortium.