News Corporation (NWSA) to Buy Houghton's Books & Media Arm

News Corporation NWSA has been undertaking strategic buyouts to enhance its portfolio. In the latest move, the global diversified media company has agreed to buy Houghton Mifflin Harcourt’s HMHC Books & Media segment for a cash outlay of $349 million.

The deal, which is subject to satisfaction of customary closing conditions, will most likely conclude in the fourth quarter of fiscal 2021. Markedly, the acquired Books & Media business will be operated by the buyer’s subsidiary, HarperCollins Publishers, thus, fueling its growth.

The deal is expected to strengthen HarperCollins’ backlist by adding over 7000 titles, comprising The Lord of the Rings trilogy, Curious George, The Polar Express, 1984, Animal Farm, The Little Prince, and more. At present, HarperCollins has rights of J.R.R. Tolkien’s works in the British Commonwealth. In addition to a growing audiobooks business, Houghton’s Books & Media encompasses a first-rate frontlist across the lifestyle and children’s segments.

The aforesaid deal also involves Houghton’s Books & Media business’ extensive children’s and young adults’ units, having published classics like Curious George and Martha Speaks, among others. These are likely to add value to HarperCollins, and widen its foothold in the children and young adult genres and audiobooks. News Corporation’s chief executive said, “There is a resurgence in reading and listening to books, and we believe the brilliant HMH Books & Media backlist and first-rate frontlist have an enduring and increasing value.”

HarperCollins expects to gain from cost and revenue benefits generated from the latest deal. It anticipates generating immediate cost savings, accumulating to over $20 million yearly within two years. Efficiencies across manufacturing, distribution and other cost activities are likely to contribute to savings.

Moreover, leveraging of the global scale and enhancement of licensing opportunities will drive revenue synergies. Last year, Houghton’s Books & Media wing witnessed solid growth, including net sales of $191.7 million and adjusted EBITDA of $26.6 million, per the public filings.

Houghton’s Books & Media segment, which boasts successful backlists in the publishing industry, also has a Productions business that repurposes renowned brands across media platforms. Notably, more than 60% of Houghton’s Books & Media revenues were realized by the backlists, which remain a strong source of revenues, margins and cash flow for publishers. Moreover, the Productions business includes the animated series Carmen Sandiego on Netflix, apart from various television projects that are currently in progress.

What’s More?

On Mar 25, News Corporation shared plans to buy Investor’s Business Daily (“IBD”) from O’Neil Capital Management for $275 million. The addition of this high-margin and fast-growing digital-first financial news and research business is likely to strengthen the buyer’s solid digital platforms.

The latest deal, which is likely to conclude in the fourth quarter of fiscal 2021, is subject to customary closing conditions. Management believes that the buyout of IBD will be operated by the company’s subsidiary, Dow Jones.

This will enhance the latter’s offerings, including proprietary data and tools for investors, while assessing the top-performing stocks. Post the completion of the buyout, IBD will operate as a stand-alone label forming part of Dow Jones.

Additionally, in the recent past, the company reached a multi-year deal with Facebook, Inc. FB. Per the three-year agreement with Facebook, News Corporation will receive payments in exchange for access to additional stories for Facebook News. This move allows millions of Facebook users in Australia to access trusted news reports through its Facebook News product.

Last month, the company announced that it has entered into a three-year partnership with Alphabet Inc.’s GOOGL Google. Per the agreement, the former will provide trusted and high-valued journalism content from its news sites around the world in exchange of significant payments from Google.

Certainly, News Corp. is making prudent efforts to drive growth across its portfolio. Incidentally, shares of this Zacks Rank #3 (Hold) company have appreciated 39.2% over the past three months compared with the industry’s 14.9% rally. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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