==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------
SCHEDULE TO
(Rule 14d-100)
TENDER OFFER STATEMENT UNDER SECTION 14(d)(1)
OR SECTION 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
------------------
HOUGHTON MIFFLIN COMPANY
(Name of Subject Company (Issuer))
VIVENDI UNIVERSAL, S.A.
SORAYA MERGER INC.
(Names of Filing Persons (Offerors))
------------------
COMMON STOCK, PAR VALUE $1.00 PER SHARE
(including associated rights)
(Title of Class of Securities)
------------------
44156010
(CUSIP Number of Class of Securities)
------------------
George E. Bushnell, III, Esq.
c/o Vivendi Universal Holding I Corp.
800 Third Avenue, Seventh Floor
New York, New York 10022
Telephone: 212-572-7855
(Name, address and telephone number of person authorized to receive
notices and communications on behalf of filing persons)
Copy to:
Faiza J. Saeed, Esq.
Cravath, Swaine & Moore
825 Eighth Avenue
New York, New York 10019
Telephone: (212) 474-1000
Calculation of Filing Fee:
==============================================================================
Transaction Valuation* Amount of Filing Fee
------------------------------------------------------------------------------
Not applicable. Not applicable.
==============================================================================
*Set forth in the amount on which the filing fee is calculated and state how
it was determined.
[X] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
Check the appropriate boxes to designate any transactions to which this
statement relates:
[X] third-party tender offer subject to Rule 14d-1.
[ ] issuer tender offer subject to Rule 13e-4.
[ ] going-private transaction subject to Rule 13e-3.
[ ] amendment to Schedule 13D under Rule 13d-2.
Check the following box if the filing is a final amendment reporting the
results of the tender offer: [ ]
==============================================================================
The description contained herein is neither an offer to purchase nor a
solicitation of an offer to sell shares of Houghton Mifflin Company. At the
time the tender offer is commenced, Vivendi Universal will file a Tender Offer
Statement and Houghton Mifflin Company will file a Solicitation/Recommendation
Statement with respect to the offer. The Tender Offer Statement (including an
offer to purchase, a related letter of transmittal and other offer documents)
and the Solicitation/Recommendation Statement will contain important
information that should be read carefully before any decision is made with
respect to the offer.
The offer to purchase, the related letter of transmittal and certain other
documents, as well as the Solicitation/Recommendation Statement, will be made
available to all shareholders of Houghton Mifflin Company, at no expense to
them. The Tender Offer Statement (including an offer to purchase, a related
letter of transmittal and other offer documents) and the
Solicitation/Recommendation Statement will also be available at no charge at
the SEC's website at www.sec.gov.
[VIVENDI UNIVERSAL LOGO]
VIVENDI UNIVERSAL AGREES TO ACQUIRE
HOUGHTON MIFFLIN IN TRANSACTION VALUED AT $2.2 BILLION
O VIVENDI UNIVERSAL PUBLISHING (VUP) WIL BECOME NO. 2
O WORLDWIDE IN EDUCATION FIELD
O VUP WILL BE AMONG THE LEADERS IN THE UNITED STATES FOR
PRIMARY EDUCATION MATERIALS
O VUP TO DIVEST PROFESSIONAL INFORMATION DIVISION
PARIS AND BOSTON, JUNE 1, 2001 - Vivendi Universal (Paris Bourse: EXFP; NYSE:
V), announced today that it has agreed with Boston-based Houghton Mifflin
Company (NYSE: HTN), a leading U.S. educational publisher, to acquire all of
the outstanding shares of Houghton Mifflin, pursuant to a cash tender offer at
$60 per share. The Boards of both companies have approved this transaction
unanimously.
The acquisition is to be accomplished through a cash tender offer for all of
Houghton Mifflin's common stock at a price of $60 per share. Following
completion of the tender offer and necessary approvals, Vivendi Universal
would consummate a merger in which all of the remaining Houghton Mifflin
shareholders will receive the same price paid in the tender offer in cash. The
transaction is subject to regulatory approvals and to other customary
conditions, including the tender of at least two-thirds of the Houghton
Mifflin shares.
Based on a total consideration of approximately $2.2 billion, which includes
the assumption of Houghton Mifflin's average net debt of $500 million, the
offer price represents 1.9 times 2001 estimated revenues of Houghton Mifflin,
7.7 times 2001 estimated EBITDA (earnings before interest, taxes, depreciation
and amortization) and 10.7 times estimated EBITDA after book plate
amortization.
With education as a growth sector worldwide, and following more than ten years
of consolidation, the education market is now global. This acquisition is
consistent with Vivendi Universal's strategic plan, which is on target to make
each of its content business units world leaders in their respective fields.
As a result of the acquisition, combined annual sales will total $2.2 billion,
boosting Vivendi Universal Publishing's position worldwide to the No. 2 spot
from No. 5 in the education field. Already a leader in France, Spain and
Brazil, with a very strong market share throughout Europe and Latin America,
with this transaction, VUP will become an education publishing leader in the
U.S.
The transaction, which is subject to regulatory approvals, will be financed
largely by the divestiture of Vivendi Universal Publishing's Professional
Information Division and Free Sheets, following the work councils information
and consultation. These businesses are more cyclical than education
publishing.
The acquisition will allow Vivendi Universal to undertake immediate synergies
in production/logistics and corporate restructuring with Vivendi Universal
Publishing's U.S. operations. VUP estimates that those synergies will reach at
least $75 million per year at the EBITDA level before the end of 2002. Thanks
to the financing of the transaction, mostly
(more)
through asset sales, the transaction will have no significant impact on
Vivendi Universal's balance sheet, and will be accretive for Vivendi Universal
shareholders at EDITDA/share level from year one, both before and after
synergies. After pro forma synergies, this accretion is over 2%. As a result
of the transaction, Vivendi Universal is strengthening its core content
businesses, gaining a worldwide leadership position in education.
Commenting on today's announcement, Jean-Marie Messier, Chairman and Chief
Executive Officer of Vivendi Universal, said: "The acquisition of Houghton
Mifflin propels Vivendi Universal Publishing to the No. 2 position worldwide
in education publishing and significantly enhances its position in the U.S.
textbook market."
Mr. Messier continued, "This strategic acquisition is another step forward for
Vivendi Universal to achieve world leadership in key content segments. It will
put us in an excellent position to capitalize on the growth of the education
sector by leveraging the content and technologies of both companies across all
of Vivendi Universal. Our priority is to develop the most attractive and
compelling content offering on all devices and platforms for our consumers. We
now have worldwide leadership positions in music, film, games, and education.
Thanks to the arbitrage within our publishing portfolio, the acquisition will
not impact our balance sheet and will be accretive to our shareholders."
"This transaction represents a new and exciting chapter in Houghton Mifflin's
history," said Nader F. Darehshori, Houghton Mifflin Company's Chairman,
President and Chief Executive Officer. "By combining with Vivendi Universal,
we become an integral part of a global publishing powerhouse - a company with
international scale, rich content and vast digital and distribution capacity.
Financially, this transaction provides immediate value to our shareholders,
and, as part of Vivendi Universal's publishing operations, Houghton Mifflin
will have the financial resources, talent and tools to further accelerate our
own growth in the digitization of our products and services, as well as new
channels of distribution for our authors, greater opportunities for our
employees, and a broader range of products for our customers. Finally, Vivendi
Universal respects our nearly 170-year heritage and great brand names, and
have stated their intent to maintain our presence in Boston."
Agnes Touraine, Vice Chairman and CEO of Vivendi Universal Publishing, said,
"Education is a growth sector worldwide, driven by rising enrollments and
increased government spending. After a decade of consolidation, the education
market has now become global. The U.S. is the largest and most dynamic market
in the world. Houghton Mifflin presents a tremendous growth opportunity for
our company, and I welcome them very warmly. With the acquisition of Houghton
Mifflin, VUP will be present in four languages - French, English, Spanish and
Portuguese. It will also strengthen prominent local brands, including Houghton
Mifflin, Larousse, Anaya, Knowledge Adventure, and will give us a real
competitive advantage compared to U.S./U.K.-centric companies. VUP will also
have a strong position on as many platforms as possible, including the
Internet, publishing and CD- ROM.
"I also would like to extend my strong thanks to and admiration for all the
teams of the professional information division that will soon leave our
company," she continued. "I would like to say how impressed I am by their
tremendous performance and many accomplishments in recent years."
When this transaction is completed, VU Publishing will be focused on three
main segments: Games, Education and Literature, and Health. Approximately 48%
of VUP's revenues will come from the U.S. and the remainder from Europe and
the rest of the world. VUP will also maintain its presence in news and
economic publications, with Groupe Express, Groupe Expansion and Groupe
Etudiant.
(more)
With consolidated sales in excess of $1.0 billion, Houghton Mifflin is the
fourth largest U.S. educational publisher, and one of the oldest publishing
houses founded in Boston in 1832. Houghton Mifflin is a pure play educational
publisher (roughly 90% of sales) serving all the components of the market
(elementary and secondary schools, supplemental, testing and college) and
utilizing multiple platforms (core basal textbooks, supplemental materials,
assessment, instructional technology). The company also publishes an extensive
line of reference works and fiction and non-fiction for adults and young
readers, including The Lord of the Rings and provides computer-testing
capabilities to the corporate market.
Houghton Mifflin has strong positions in K-12 (70% of sales). It ranks number
four in elementary, number three in secondary and testing. Its core business
areas include Reading, Math and Language Arts. The company is also the fourth
largest college publisher with strong position in the advance placement
market.
ABOUT VIVENDI UNIVERSAL
MEDIA AND COMMUNICATIONS AND ENVIRONMENTAL SERVICES: The media and
communications business is divided into five business segments: Music,
Publishing, TV and Film, Telecoms and Internet. The MUSIC business is
conducted though Universal Music Group, which produces, markets and
distributes recorded music throughout the world in all major genres. Universal
Music Group also manufactures, sells and distributes video products in the
United States and internationally, and licenses music copyrights in 63
countries worldwide. The PUBLISHING business is Europe's premier publisher of
information providing content across multiple platforms, including print,
multimedia, on the wired Internet and to PDAs via WAP (Wireless Application
Protocol) technology. The Publishing business is a content leader in five core
markets: education, games, healthcare information, local services and business
and general information. The TV AND FILM business produces and distributes
motion picture, television and home video/DVD products worldwide, operates and
has ownership interests in a number of cable and pay TV channels, engages in
the licensing of merchandising and film property rights and operates theme
parks and retail stores around the world. The TELECOMS business provides a
broad range of telecommunications services, including mobile and fixed
telephony, Internet access and data services and transmission, principally in
Europe. The INTERNET business manages the strategic Internet initiatives and
new online ventures for Vivendi Universal. Utilizing advanced digital
distribution technology, the Internet business develops e-commerce, e-services
and thematic portals that offer access to the Internet via a variety of
devices, including mobile phones, PDAs, interactive TV and computers. VIVENDI
ENVIRONNEMENT, is a 63-percent effectively owned subsidiary of Vivendi
Universal, which operates the environmental services business, with operations
around the globe. Vivendi Environnement provides environmental management
services, including water treatment and system operation, waste management,
energy services and power generation, and transportation services, to a wide
range of public authorities and industrial, commercial and residential
customers.
The Company's corporate website is located at http://www.vivendiuniversal.com.
The Company's financial website is located at
http://finance.vivendiuniversal.com.
ABOUT HOUGHTON MIFFLIN
HOUGHTON MIFFLIN is a leading publisher of textbooks, instructional
technology, assessments and other education materials for elementary and
secondary schools and colleges. While it has a presence in segments of
educational products, it has an exceptionally strong position
(more)
in K-12 (70% of total sales). The company also publishes an extensive line of
referenceworks and fiction and non-fiction for adults and young readers. The
company's web site is located at http://www.hmco.com.
The description contained herein is neither an offer to purchase nor a
solicitation of an offer to sell shares of Target. At the time the tender
offer is commenced, Parent will file a Tender Offer Statement and Target will
file a Solicitation/Recommendation Statement with respect to the offer. The
Tender Offer Statement (including an offer to purchase, a related letter of
transmittal and other offer documents) and the Solicitation/Recommendation
Statement will contain important information that should be read carefully
before any decision is made with respect to the offer.
The offer to purchase, the related letter of transmittal and certain other
documents, as well as the Solicitation/Recommendation Statement, will be made
available to all shareholders of Target, at no expense to them. The Tender
Offer Statement (including an offer to purchase, a related letter of
transmittal and other offer documents) and the Solicitation/Recommendation
Statement will also be available at no charge at the SEC's website at
www.sec.gov.
This press release contains "forward-looking statements" as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are not guarantees of future performance. Actual
results may differ materially from the forward-looking statements as a result
of a number of risks and uncertainties, many of which are outside our control,
including but not limited to: the risk that recently acquired operations will
not be integrated successfully; that the synergies expected to be created as a
result of recent acquisitions will not materialize; that Vivendi Universal
will be unable to further identify, develop and achieve success for new
products, services and technologies; that Vivendi Universal will face
increased competition and that the effect on pricing, spending, third-party
relationships and revenues of such competition will limit or reduce Vivendi
Universal's revenue and/or income; that Vivendi Universal will be unable to
establish and maintain relationships with commerce, advertising, marketing,
technology, and content providers; and that Vivendi Universal will be unable
to obtain or retain, upon acceptable terms, the licenses and permits necessary
to operate and expand its businesses; as well as the risks described in the
documents Vivendi Universal has filed with the U.S. Securities and Exchange
Commission. Investors and security holders are urged to read those documents
at the Commission's web site at www.sec.gov. Those documents may also be
obtained free of charge from Vivendi Universal.
CONTACTS:
VIVENDI UNIVERSAL PUBLISHING HOUGHTON MIFFLIN
MEDIA RELATIONS: MEDIA RELATIONS:
Paris Margaret Sherry
Marie- Francoise Martinez 617-351-5113
011-33-1-53-53-38-20
INVESTOR RELATIONS:
VIVENDI UNIVERSAL - CORPORATE Susan E. Hardy
PARIS 617-351-5114
Alain Delrieu
011-33-1-71-71-1341 VIVENDI UNIVERSAL - CORPORATE
INVESTOR RELATIONS:
Antoine Lefort PARIS
011-33-1-71-71-1180 Ariane de Lamaze
011-33-1-71-71-1084
NEW YORK
Anita Larsen NEW YORK
212-572-1118, or Eileen McLaughlin
407-503-0094, or 212-572-8961
Mia Carbonell
212-572-7556
(more)
VIVENDI
UNIVERSAL
---------------------------
PROPOSED ACQUISITION
OF HOUGHTON MIFFLIN
---------------------------
IMPORTANT LEGAL DISCLAIMER
---------------------------
The description contained herein is neither an offer to purchase nor a
solicitation of an offer to sell shares of Target. At the time the tender
offer is commenced, Parent will file a Tender Offer Statement and Target
will file a Solicitation/Recommendation Statement with respect to the
offer. The Tender Offer Statement (including an offer to purchase, a
related letter of transmittal and other offer documents) and the
Solicitation/Recommendation Statement will contain important information
that should be read carefully before any decision is made with respect to
the offer.
The offer to purchase, the related letter of transmittal and certain
other documents, as well as the Solicitation/Recommendation Statement, will
be made available to all shareholders of Target, at no expense to them. The
Tender Offer Statement (including an offer to purchase, a related letter of
transmittal and other offer documents) and the Solicitation/Recommendation
Statement will also be available at no charge at the SEC's website at
www.sec.gov.
This document contains "forward-looking statements" as that term is
defined in the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are not guarantees of future performance. Actual
results may differ materially from the forward-looking statements as a
result of a number of risks and uncertainties, many of which are outside
our control, including but not limited to: the risk that recently acquired
operations will not be integrated successfully; that the synergies expected
to be created as a result of recent acquisitions will not materialize; that
Vivendi Universal will be unable to further identify, develop and achieve
success for new products, services and technologies; that Vivendi Universal
will face increased competition and that the effect on pricing, spending,
third-party relationships and revenues of such competition will limit or
reduce Vivendi Universal's revenue and/or income; that Vivendi Universal
will be unable to establish and maintain relationships with commerce,
advertising, marketing, technology, and content providers; and that Vivendi
Universal will be unable to obtain or retain, upon acceptable terms, the
licenses and permits necessary to operate and expand its businesses; as
well as the risks described in the documents Vivendi Universal has filed
with the U.S. Securities and Exchange Commission. Investors and security
holders are urged to read those documents at the Commission's web site at
www.sec.gov. Those documents may also be obtained free of charge from
Vivendi Universal.
VIVENDI
---------------------------
UNIVERSAL
ACQUISITION OF HOUGHTON MIFFLIN
---------------------------
o VU launches a tender offer on Houghton Mifflin at 60$ per share for a
total consideration of 1.77bn$ (+ average net debt of 480M$) and becomes
no. 2 worldwide in education
o Acquisition to be largely refinanced by the disposal of VUP free sheets,
trade fairs and professional press businesses
VIVENDI
---------------------------
UNIVERSAL
STRATEGIC RATIONALE
---------------------------
o Moving from cyclical business to long term steady growth
o Consolidation of VU strategy on edutainment products
o Benefiting from the value of synergies
o VUP now refocused on:
o education (edutainment, e-learning): no. 2 worldwide
Euros 2.3bn sales
o games: no. 2 worldwide on PC
Euro 0.4bn sales
o health: a worldwide leader
Euro 0.4bn sales
VIVENDI
---------------------------
UNIVERSAL
VU CURRENT POSITIONING
IN KEY CONTENT AREAS
---------------------------
o Consumer focused: edutainment
o Achieve leadership in key "must have contents"
o Music: no. 1 worldwide
o Films: no. 2 worldwide
o Games: no. 1 worldwide on line and no. 2 on PC
o Sports: European leader following alliance with
RTL Group and JC Darmon
o Education: global player and no. 5 worldwide
o Focus on content to which VU will add value, by distributing on an
international basis and on all platforms to reach a worldwide leadership
in all fields
VIVENDI
---------------------------
UNIVERSAL
EDUCATION: A GROWTH BUSINESS
---------------------------
o A Euros 25bn market worldwide
o Favorable demographic trends, increased enrollments
o Increasing political motivation and government spending,
o particularly in the US: budget surpluses, World's largest
education market (50% of global market)
o and Brazil
o Strong competitive advantage
VIVENDI
---------------------------
UNIVERSAL
EDUCATION GOES DIGITAL
---------------------------
o Digitalization changes production process: e-production
o Increased customization: going from product to services
o Increased penetration of computers in schools (93% of US schools) and
homes. Trend towards integrated learning systems
o Supplemental, testing, remediation
VIVENDI
---------------------------
UNIVERSAL
DIGITAL REVOLUTION DRIVES CONSOLIDATION
---------------------------
o If curriculums are local...
o ...technology is global (engine, classroom administration, ILS)
o ...so are content databases
o Know-how is key
VIVENDI
---------------------------
UNIVERSAL
EDUCATION BECOMING A GLOBAL MARKET
---------------------------
GRAPHIC OMITTED
US UK
o Pearson: no. 1 o Reed: no. 1
o McGraw-Hill: no. 2 o Pearson: no. 2
o Reed/Harcourt: no. 3
o Houghton Mifflin: no. 4
BRAZIL FRANCE
o VUP: no. 1 o VUP: no. 1
o Santillana: no. 2 o Hachette: no. 2
OTHER LATIN AMERICA SPAIN
o Santillana: no. 1 o VUP: no. 1
o VUP: no. 2/3 o Santillana: no. 2
VIVENDI
---------------------------
UNIVERSAL
VUP IN EDUCATION: #5 WORLDWIDE TODAY
---------------------------
Key worldwide Players 2000 Revenues in VUE Key Metrics
Education and Literature
(million Euros)
Recent acquistions Total sales 2000A: Euro 1.2bn
contributions to 2000 sales o/w USA: 15%
Europe & RoW 85%
EBITDA 2000A: Europ 0.16bn
[Chart omitted]
VIVENDI
---------------------------
UNIVERSAL
TODAY: VUE HAS IMPRESSIVE POSITIONS
---------------------------
CHART
VIVENDI
---------------------------
UNIVERSAL
VUE HAS STRONG KNOW-HOW ON INTERNET
---------------------------
o education.com: the only global internet initiative addressing 3 target
audiences simultaneously
o Core target: parents (caretakers)
o direct purchasing
o recommendation to children
o end-use
o Secondary target: children
o end-use (main target)
o recommendation to parents and to other children
o Complementary target: teachers
o recommendation to parents and children
o end-use
VIVENDI
---------------------------
UNIVERSAL
HOUGHTON MIFFLIN: KEY FACTS
---------------------------
o Founded in 1832, well established Boston-based company
o 2001B Sales of $1.2bn of which 97% in the US
o EBITDA margin of 25% in 2001B
o Market capitalization of $1.3bn
(April 25, 2001, unaffected price)
o 3,500 employees
VIVENDI
---------------------------
UNIVERSAL
HOUGHTON MIFFLIN: 70% OF SALES IN K-12
---------------------------
CHART
VIVENDI
---------------------------
UNIVERSAL
HOUGHTON MIFFLIN HAS STRONG MARKET POSITIONS IN READING AND MATH...
----------------------------------------------------------
Houghton Mifflin Market Positioning Key Strengths
o Houghton Mifflin products are o #4 player in the K-12 US market
focused on
o Reading o #1 in K 6/8 in Reading,
o Languages Arts Language Arts and Math
o Maths
o #1 in K6/12 in Math, History,
o These 3 disciplines account World Languages, #2 in
for 75% of the elementary Language Arts
market
o # 4 in K-12 test market,
o 60-65% of Houghton Mifflin K-12 high growth and profitable
sales are derived from Reading activity
and Languages Arts
o 15% of Houghton Mifflin K-12
sales are derived from Maths
----------------------------------------------------------
HOUGHTON MIFFLIN ALSO HAS STRONG POSITIONS IN ASSESSMENT
---------------------------
o # 4 in K-12 test market (Riverside), high growth and profitable activity
o Well known and respected K-12 group clinical testing brands
o Ability to deliver assessment content and information in both
printed and electronics formats
o A 900M$ market (group and clinical assessment) that is growing at 7-10%
annually
o Increasing State testing programs (federal and state legislation
requiring greater accountability for ignored student performance)
o Growth areas: custom states CRT, on-line assessment, interactive
reporting and data aggregation on the Internet with links to curriculum
content
VIVENDI
---------------------------
UNIVERSAL
ALSO PRESENT IN COLLEGE AND TRADE
---------------------------
o Profitable and balanced College portfolio (2001B sales of $175M or 15% of
total revenues)
o no. 1 in the growing Advanced Placement market
o focus on 18 of the 35 disciplines in college curriculum
o Strong and profitable Trade and Reference division (2001B sales of $100M
or 9% of total revenues)
o recognized quality in inprints
o high authors' oyalty
o focus on juvenile (40% of sales), dictionaries (19% of sales)
and adult fiction (31% of sales)
VIVENDI
---------------------------
UNIVERSAL
STRONG PROFITABILITY
----------------------------------------------------------
Key Financials
M$ 2000A 2001B
(adoption years)
Revenues 1,028 1,159
% growth 8.2% >10%
'01 growth driven
EBITDA stand-alone 244 by adoption
% Margin 25.0% ~25% --'02 driven by
synergies
EBITDA after book plate amort. 191
% Margin 18.6% ~18%
EBITA 174
% Margin 16.9% ~16%
Capex (23)
Cash Earnings 95
Shareholder's Equity 413
Net Financial Debt 423
Goodwill 431
VIVENDI
---------------------------
UNIVERSAL
COSTS SYNERGIES
---------------------------
o The acquisition would generate immediate cost synergies of circa $40M in:
o production (paper purchases, printing and binding) and logistics
(distribution, freight and transport): ~ $20M
o corporate restructuring of US operations ($20M)
o G&A (Houghton Mifflin's corporate overheads)
VIVENDI
---------------------------
UNIVERSAL
REVENUES AND TECHNOLOGY SYNERGIES
---------------------------
o Revenues synergies resulting from the combination of VUP and Houghton
Mifflin (digitalization, image data bank, content combination and
international)
o Technology, internet-related costs
------> Total synergies of $75M at the EBITDA level
------> Completed over a 18-month period
VIVENDI
---------------------------
UNIVERSAL
OFFERED PRICE
---------------------------
o Acquisition of all Houghton Mifflin outstanding common shares at a price
of $60 per share
Number of share outstanding (1): 29.5 million
Price per share: 60$
-------------
CONSIDERATION 1.768 M$
Avg. Net Debt 480 M$
-------------
ENTERPRISE VALUE: 2,248 M$
(1) Fully diluted treaaury shares method
VIVENDI
---------------------------
UNIVERSAL
PRICE BENCHMARK
---------------------------
o TOTAL CONSIDERATION OF $2.2BN:
= 1.9x 2001e sales
= 7.7x 2001e EBITDA before synergies
= 10.7x 2001e EBITDA post book plate amortization before
synergies
o SYNERGIES REPRESENT 25% OF 2001 EBITDA
SALES EBITDA EBITDA
o PUBLIC COMPANIES BENCHMARK: PRE-PUB POST-PUB
o McGraw Hill (2001) 3.0x 11.0x 13.5x
o John Wiley (2001) 2.0x 8.2x 9.9x
o RECENT TRANSACTIONS:
o Harcourt (LTM) 2.4x 12.7x
o Simon & Schuster (LTM) 2.4x 14.4x
VIVENDI
---------------------------
UNIVERSAL
ACQUISITION FINANCED BY DISPOSALS
---------------------------
o Most significant parts of VUP Information to be disposed of:
(Euro M) 2001 Sales 2001 EBITDA
Estimated Estimated
Trade Magazines and
Trade Shows 600 87
Free Sheets 370 35
VIVENDI
---------------------------
UNIVERSAL
VIVENDI
UNIVERSAL
---------------------------
PROPOSED ACQUISITION
OF HOUGHTON MIFFLIN
VIVENDI
---------------------------
UNIVERSAL
PROPOSED ACQUISITION
OF HOUGHTON MIFFLIN
ACQUISITION OF HOUGHTON MIFFLIN
----------------------------------------------------------
o VU launches a tender offer on Houghton Mifflin at 60$ per share for
a total consideration of $ 1.77bn (+ average net debt of $ 480M) and
becomes no.2 worldwide in education
o Acquisition to be largely refinanced by the disposal of VUP free
sheets, trade fairs and professional press businesses
----------------------------------------------------------
HOUGHTON MIFFLIN: KEY FACTS
----------------------------------------------------------
o Founded in 1832, well established Boston-based company
o 2001B Sales of $1.2bn of which 97% in the US
o EBITDA margin of 25% in 2001B
o Market capitalization of $1.3bn (April 25, 2001, unaffected price)
o 3,500 employees
----------------------------------------------------------
HOUGHTON MIFFLIN: 70% OF SALES IN K-12
----------------------------------------------------------
Segments Houghton Mifflin Divisions Activities
School Division K-6/8 textbooks and ancillary
McDougal Littell Grades 6-12 textbooks and ancillary
K-12 Great Source K-12 Supplementals
2001B: $850M Sunburst Technology Corp. K-12 Software & Video
Riverside Publishing Testing & Assessment
Incl. Virtual Learning Technologies Online testing
Classwell Online resources for K-12 teachers
Higher Education College Division Textbooks and ancillary
2001B: $175M
Other Trade & Reference Division Adult & kids literature and Reference
2001B: $135M Computer Adaptive Technologies Adult online testing for corporations
----------------------------------------------------------
HOUGHTON MIFFLIN HAS STRONG MARKET POSITIONS IN READING AND MATH...
----------------------------------------------------------
Houghton Mifflin Market Positioning Key Strengths
o Houghton Mifflin products are o #4 player in the K-12 US market
focused on
o Reading o #1 in K 6/8 in Reading,
o Languages Arts Language Arts and Math
o Maths
o #1 in K6/12 in Math, History,
o These 3 disciplines account World Languages, #2 in
for 75% of the elementary Language Arts
market
o # 4 in K-12 test market,
o 60-65% of Houghton Mifflin K-12 high growth and profitable
sales are derived from Reading activity
and Languages Arts
o 15% of Houghton Mifflin K-12
sales are derived from Maths
----------------------------------------------------------
HOUGHTON MIFFLIN ALSO HAS STRONG
POSITIONS IN ASSESSMENT
----------------------------------------------------------
o # 4 in K-12 test market (Riverside), high growth and profitable
activity
o Well known and respected K-12 group clinical testing brands
o Ability to deliver assessment content and information in both
printed and electronics formats
[Graphics omitted]
The Stanford
Iowa Binet Assess 2 Learn
Tests Intelligence Scales
o A $900M market (group and clinical assessment) that is growing at
7-10% annually
o Increasing State testing programs (federal and state legislation
requiring greater accountability for ignored student performance)
o Growth areas: custom states CRT, on-line assessment, interactive
reporting and data aggregation on the Internet with links to
curriculum content
----------------------------------------------------------
ALSO PRESENT IN COLLEGE AND TRADE
----------------------------------------------------------
o Profitable and balanced College portfolio
(2001B sales of $175M or 15% of total revenues)
o No.1 in the growing Advanced Placement market
o Focus on 18 of the 35 disciplines in college curriculum
o Strong and profitable Trade and Reference division (2001B sales of
$100M or 9% of total revenues)
o Recognized quality in inprints
o High authors' loyalty
o Focus on juvenile (40% of sales), dictionaries (19% of sales)
and adult fiction (31% of sales)
[Graphics omitted]
----------------------------------------------------------
OFFERED PRICE
----------------------------------------------------------
o Acquisition of all Houghton Mifflin outstanding common shares at a
price of $60 per share
Number of share outstanding (1): 29.5 million
Price per share: $60
---------
CONSIDERATION $1.768 M
Avg. Net Debt $480 M
---------
ENTERPRISE VALUE: $2,248 M
(1) Fully diluted treasury shares method
----------------------------------------------------------
PRICE BENCHMARK
----------------------------------------------------------
o Total consideration of $2.2bn:
= 1.9x 2001e sales
= 7.7x 2001e EBITDA before synergies
= 10.7x 2001e EBITDA post book plate amortization before
synergies
o Synergies represent 25% of 2001 EBITDA
Sales EBITDA EBITDA
pre-pub post-pub
o Public companies benchmark:
o McGraw Hill (2001) 3.0x 11.0x 13.5x
o John Wiley (2001) 2.0x 8.2x 9.9x
o Recent transactions:
o Harcourt (LTM) 2.4x 12.7x
o Simon & Schuster (LTM) 2.4x 14.4x
----------------------------------------------------------
STRONG PROFITABILITY
----------------------------------------------------------
Key Financials
M$ 2000A 2001B
(adoption years)
Revenues 1,028 1,159
% growth 8.2% >10%
'01 growth driven
EBITDA stand-alone 244 by adoption
% Margin 25.0% ~25% --'02 driven by
synergies
EBITDA after book plate amort. 191
% Margin 18.6% ~18%
EBITA 174
% Margin 16.9% ~16%
Capex (23)
Cash Earnings 95
Shareholder's Equity 413
Net Financial Debt 423
Goodwill 431
----------------------------------------------------------
COSTS SYNERGIES
----------------------------------------------------------
o The acquisition would generate immediate cost synergies of circa
$40M in:
o Production (paper purchases, printing and binding) and logistics
(distribution, freight and transport): ~ $20M
o Corporate restructuring of US operations ($20M)
o G&A (Houghton Mifflin's corporate overheads)
----------------------------------------------------------
REVENUES AND TECHNOLOGY SYNERGIES
----------------------------------------------------------
o Revenues synergies resulting from the combination of VUP and
Houghton Mifflin (digitalization, image data bank, content
combination and international)
o Technology, internet-related costs
o Total synergies of $75M at the EBITDA level
o Completed over a 18-month period
----------------------------------------------------------
ACQUISITION FINANCED BY DISPOSALS
----------------------------------------------------------
o Most significant parts of VUP Information to be disposed of:
(Euro M) 2001 Sales 2001 EBIDTA
Estimated Estimated
Trade Magazines and
Trade Shows 600 87
Free Sheets 370 35
----------------------------------------------------------
STRATEGIC RATIONALE
----------------------------------------------------------
o Moving from cyclical business to long term steady growth
o Consolidation of VU strategy on edutainment products
o Benefiting from the value of synergies
o VUP now refocused on:
o Education (edutainment, e-learning): no.2 worldwide
Euros 2.3bn sales
o Games: no.2 worldwide on PC
Euro 0.4bn sales
o Health: a worldwide leader
Euro 0.4bn sales
----------------------------------------------------------
VU CURRENT POSITIONING
IN KEY CONTENT AREAS
----------------------------------------------------------
o Consumer focused: edutainment
o Achieve leadership in key "must have contents"
o Music: no.1 worldwide
o Films: no.1 worldwide
o Games: no.1 worldwide on line and no.2 on PC
o Sports: European leader following alliance with RTL Group and
JC Darmon
o Education: global player and no.5 worldwide
o Focus on content to which VU will add value, by distributing on an
international basis and on all platforms to reach a worldwide
leadership in all fields
----------------------------------------------------------
VIVENDI
UNIVERSAL
----------------------------------------------------------
PROPOSED ACQUISITION
OF HOUGHTON MIFFLIN