Educational publisher HMH eyes IPO

Houghton Mifflin Harcourt, the US educational publisher that emerged from bankruptcy proceedings last year, is preparing to file for an initial public offering that could raise $250m, people familiar with its plans said.

The company has appointed Morgan Stanley, Goldman Sachs, Citigroup, Credit Suisse and Wells Fargo to lead the IPO, they said, for a listing that could come by the end of the year. HMH declined to comment on the plans, which were first reported by Reuters.

Linda Zecher, a former Microsoft executive who became chief executive in September 2011, told the Financial Times last summer she hoped to bring the company to the market within 18 months to two years. HMH competes in the $6bn US school market with Pearson, the owner of the Financial Times.

An IPO would cap a tumultuous period for the company that was put together by Irish entrepreneur Barry O’Callaghan through two leveraged buyouts in the middle of the last decade.

Having struggled with the debt from those deals, it restructured in February 2010 to cut debt from $7bn to $3bn, then went through a month-long Chapter 11 bankruptcy reorganisation last year that converted $3.1bn of its debt to equity.

A public listing could be an opportunity for lenders such as Paulson & Co and Apollo Global Management to begin to extract some of their investment.

News of the IPO preparations comes three weeks after Cengage, the Apax-owned educational publisher which competes with HMH in the school market but is more focused on higher education, filed for Chapter 11 bankruptcy protection, seeking to cut more than $4bn from its $5.8bn debt load.

In March, Apollo completed the $2.4bn acquisition of McGraw-Hill Education, another large competitor in the US education market.

HMH has followed its rivals in investing more heavily in digital technology and products it can sell direct to students and their parents.

On Wednesday it unveiled a new e-commerce site for teachers, parents, students and readers offering mobile learning applications, classroom materials, cookbooks and fiction titles from Curious George to The Lord of the Rings.

HMH’s core US school market has been shaken by digital disruption, with heavy investment from traditional textbook publishers and incursions from digital-only start-ups. It is heavily dependent on national and local government budgets, which have been under pressure in the past five years, at the same time as the Obama administration introduces new Common Core standards for parts of the curriculum.

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