Deal reported close for Houghton Mifflin
An Irish educational software publisher is close to buying Houghton Mifflin Co., the long-established Boston publishing house currently owned by a consortium of buyout firms, Irish and British papers reported Sunday.
The Times of London and the Sunday Business Post of Dublin each said closely held Riverdeep Holdings PLC of Dublin would pay about $3.5 billion to acquire Houghton Mifflin from Thomas H. Lee Partners and Bain Capital, both of Boston, and the Blackstone Group of New York and London. The three firms snapped up Houghton Mifflin, which traces its roots in Boston to 1832, for $1.66 billion nearly four years ago from Vivendi Universal, a French media firm.
Officials from Riverdeep and Lee could not be reached yesterday. Spokesmen for Bain, Blackstone, and Houghton Mifflin declined to comment.
Industry analysts said such a merger could make sense. Riverdeep is the largest publisher of K-12 educational software in the United States, and Houghton Mifflin is the fourth largest publisher of K-12 textbooks, supplements, and standardized tests, according to Simba Information, a publishing industry market research firm in Stamford, Conn.
The merger would provide Riverdeep with extensive sales channels to US schools and state education departments, while giving Houghton Mifflin the chance to expand its digital products, industry analysts said.
Riverdeep's US sales totaled about $200 million last year, about 60 percent of the firm's $330 million in worldwide sales, according to Simba. Houghton Mifflin, which also has trade and college publishing divisions, reported school-publishing operations accounted for about 70 percent, or $925 million, of $1.28 billion in 2005.
"This could be a very interesting fit," said Kathy Mickey, senior analyst and managing editor of Simba's education group. "Riverdeep is a very strong company, doing very well in the US market. But the big issue is the financing behind it."
The Times and Sunday Business Post reported that Riverdeep chief executive Barry O'Callaghan is negotiating with several investment banks to put together a financing package of stock and debt. The papers said the deal is expected to be finalized in about three weeks.
Industry analysts said Bain, Lee, and Blackstone were expected to soon put Houghton Mifflin on the block. Typically, such firms buy companies, build their values, and cash out in three to five years. Until reports of the Riverdeep sale, many industry analysts expected Bain, Lee, and Blackstone to seek an initial public offering for Houghton Mifflin. An initial public offering, or IPO, sells shares of a company on public stock exchanges.
Robert Gavin can be reached at rgavin@globe.com. 
