Houghton Mifflin Harcourt Enters Into Definitive Agreement to Divest HMH Books & Media Consumer Publishing Business for $349 Million

Learning technology company Houghton Mifflin Harcourt (“HMH” or the “Company”) (Nasdaq: HMHC) today announced that it has entered into a definitive agreement to divest HMH Books & Media, its consumer publishing business, to HarperCollins Publishers, a division of News Corp (Nasdaq: NWSA), a global, diversified media and information services company, for a cash purchase price of $349 million.The divestiture enables HMH to focus singularly on K–12 education and accelerate growth momentum in digital sales, annual recurring revenue and free cash flow while paying down a significant portion of its debt.

For nearly two centuries, HMH Books & Media has published some of the world’s most renowned novels, nonfiction, cookbooks and children’s books. HMH publishes celebrated best-sellers such as the popular J.R.R. Tolkien titles, The Best American® series, major cookbook brands such as Instant Pot Miracle and the How to Cook Everything® series, as well as iconic children’s books and characters such as Curious George®, Little Blue Truck, and The Giver. HMH Books & Media also houses HMH Productions, an innovative production company, with expertise across all media platforms that produces TV, film, and interactive media including Carmen Sandiego (an original Netflix series and film) and more.

“At HMH, we are incredibly proud of our legacy, which encompasses nearly 200 years of innovation in trade publishing and education, touching countless teachers, students and readers over time. The divestiture of the HMH Books & Media business allows us to deepen our focus on K­­­–12 education, while also providing our talented consumer publishing colleagues and authors with infrastructure and support to fuel continued growth, champion new stories and continue this legacy,” said Jack Lynch, President and CEO, HMH.

HMH is the largest learning technology company in the K­­­–12 market, serving 90% of the schools, teachers and students in the U.S. “HMH is the leader in not only scale, but in proven, research-based programs informed by learning science—and it is that intersection of learning science and learning technology that sets us apart. There is incredible demand for our expertise as schools across the country plan for post-pandemic learning and recovery,” added Lynch. “This is an inflection moment for K–12 education in our country and for HMH as a trusted partner to schools and teachers in advancing learning for every student.”

As part of the agreement, all HMH Books & Media employees will join HarperCollins, News Corp’s trade publishing division. HMH and News Corp will work closely to provide a smooth transition for employees, customers, authors and illustrators.

The divestiture is subject to customary closing conditions, including regulatory approvals. The transaction is expected to close in the second quarter of 2021.

Updated Outlook
HMH today also updated its full-year 2021 outlook to adjust for the sale. The Company now expects 2021 billings in a range of $905 million to $955 million with an unlevered free cash flow margin in a range of 9% to 11%, reflecting the expected removal of HMH Books & Media from continuing operations. HMH will report the HMH Book & Media business as discontinued operations beginning with the quarter ending March 31, 2021.

HMH Books & Media contributed approximately $192 million in billings to HMH in 2020. HMH expects total net cash proceeds of approximately $337 million, which it plans to use all net proceeds to pay down debt, further aligning the company’s capital structure with its Digital First, Connected strategy.

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