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Houghton Mifflin Harcourt is looking to iPad games, ecommerce sales to parents and partnerships with technology companies to diversify the restructured educational publisher in the hope of taking it public within two years.
The Boston-based group, built from two leveraged deals during the credit bubble, emerged 10 days ago from a month-long Chapter 11 bankruptcy reorganisation – its second restructuring – with $3.1bn of its debt converted to equity.
Linda Zecher, chief executive since September, said that lenders, led by Paulson & Co, had agreed to a five-year plan and she hoped to pursue an initial public offering “over the next 18 to 24 months”.
The restructuring would allow HMH – which competes in school and consumer publishing with Pearson, owner of the Financial Times and Penguin – to move faster into areas adjacent to its core textbook business, Ms Zecher said.
The past debt burden on HMH “definitely had a negative impact on the company” by preventing it from making certain acquisitions, she said, but it could now look again at deals.
HMH would not sell its trade publishing business, which holds rights to children’s books from Little Blue Truck to The Hobbit, she said, because of the opportunity to “take our content and move it into different areas”.
The group had sold 1m downloads of an application for iPads and iPhones based on its Curious George books, she said, while its classic authors, including Mark Twain and Henry Wadsworth Longfellow, could bolster its school literature programmes.
“What we can gain from trade is far greater than [the benefits of] just selling it,” said Ms Zecher, who has consolidated separate sales forces and financial organisations in recent months.
Beyond selling to classrooms, HMH is redesigning its more than 60 websites as part of an effort to build revenues from direct online sales to parents, teachers and students. Its diversification efforts would not include running schools, however, she said.
Apple’s entry into interactive textbooks this year has highlighted the rapid adoption of technology in classrooms and the interest large technology groups have in the digitisation of education.
Ms Zecher, a former Microsoft executive, said the digital learning transition would take time, adding that it would still print textbooks until broadband became more widely available and tablets became cheaper because “we can’t get ahead of our customer”.
HMH would also strike partnerships with technology companies including Apple.