Houghton Mifflin Harcourt

• 1. Introduction

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  Houghton Mifflin Harcourt sits in Boston's Financial District today as one of America's largest educational publishers, but its origins trace back to a bookselling shop acquired in 1832. Two men, William Ticknor and John Allen, bought that Boston business and began publishing. What followed was nearly two centuries of mergers, financial crises, corporate raids, and a catalog that somehow managed to include both standardized testing and The Handmaid's Tale. How does a firm that once rejected Julia Child's cookbook end up shaping what millions of American schoolchildren read? And how does a company accumulate billions in debt, lose it all, and still survive?

• 2. The Partners and the Press

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  James T. Fields joined the Boston bookselling firm as a partner in 1843 and helped build one of the most remarkable literary rosters of the nineteenth century, publishing Ralph Waldo Emerson, Nathaniel Hawthorne, and Henry David Thoreau. The firm developed a close working relationship with Riverside Press, a Boston printing operation owned by Henry Oscar Houghton. Houghton was not content simply to print for others. In 1864 he founded his own publishing house, Hurd and Houghton, in partnership with Richard M. Hurd.

  George H. Mifflin joined that partnership in 1872, bringing new resources and energy to the venture. By 1878, the original Ticknor and Fields operation, now under the direction of James R. Osgood, was in financial trouble and merged with Hurd and Houghton. The newly combined firm, called Houghton, Osgood and Company, was based in Boston's Winthrop Square and held the literary rights of both predecessor publishers. When Osgood departed two years later, the firm took the name Houghton, Mifflin and Company, the direct ancestor of the modern corporation.

  Debt had entered the picture early. Even while maintaining a productive working relationship with businessman Lawson Valentine, Houghton, Mifflin inherited financial obligations from the old Ticknor and Fields operation. New partners kept arriving: James D. Hurd, son of Melancthon Hurd, in 1884; then James Murray Kay, Thurlow Weed Barnes, and Henry Oscar Houghton Jr. in 1888. The 1891 creation of an educational division pointed toward the company's future, and formal incorporation came in 1908, when the firm adopted the name Houghton Mifflin Company.

• 3. Tests, Rejections, and a Famous Cookbook

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  Houghton Mifflin's turn toward standardized testing began in 1916, when the company started working with Everett Franklin Lindquist, who would later create the ACT exam. By 1921, that educational focus had lifted the company to the rank of fourth-largest educational publisher in the United States.

  The firm's most consequential rejection arrived in the form of a manuscript for Mastering the Art of French Cooking, submitted by Julia Child, Simone Beck, and Louisette Bertholle. Houghton Mifflin passed on it. Alfred A. Knopf published the first volume in 1961, and by 1966 the book had sold close to 300,000 copies, according to Time magazine. The rejection was later dramatized in the 2009 film Julie and Julia.

  In 1967, the company listed on the New York Stock Exchange under the ticker symbol "HTN", making it a publicly traded enterprise for the first time. A dozen years later, in 1979, HMH picked up the catalog of Parnassus Press, a small Berkeley, California publisher founded in 1957 by Herman Schein, the husband of writer-illustrator Ruth Robbins. That catalog included works by Ursula K. Le Guin, Beverly Cleary, and Allen Say, among others. That same year the company acquired Clarion Books, the children's division of Seabury Press.

• 4. Acquisition and Debt

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  Nader F. Darehshori led a string of acquisitions in the mid-1990s that deepened the company's reach into education. In 1994, Houghton Mifflin bought educational publisher McDougal Littell for $138 million. The following year it acquired D.C. Heath and Company, a supplemental educational resources publisher, and Chapters Publishing, which focused on cooking, gardening, and crafts. By 1996, a new internal unit called Great Source Education Group was created to consolidate the supplemental product lines from those various imprints.

  The company's acquisition by French media giant Vivendi Universal in 2001 for $2.2 billion, including assumed debt, marked a turning point toward financial instability. Within a year, Vivendi was under mounting legal and financial pressure and sold Houghton Mifflin to private equity investors Thomas H. Lee Partners, Bain Capital, and the Blackstone Group for $1.66 billion, including assumed debt. That figure was roughly 25% less than Vivendi had paid just one year earlier.

  On the 22nd of December 2006, Riverdeep PLC completed its acquisition of Houghton Mifflin. Riverdeep paid $1.75 billion in cash and assumed $1.61 billion in debt from the private equity firms. The combined entity was called the Houghton Mifflin Riverdeep Group. Tony Lucki, a former non-executive director of Riverdeep, remained as chief executive until April 2009. On the 16th of July 2007, the company announced a deal to acquire the education, trade, and Greenwood-Heinemann divisions of Reed Elsevier for $4 billion, and the expanded company was renamed Houghton Mifflin Harcourt.

• 5. Financial Crisis and Restructuring

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  On the 25th of November 2008, Houghton Mifflin Harcourt froze all new acquisitions for its trade division, citing the 2008 financial crisis. The trade division's publisher resigned, apparently in protest, and many observers in the publishing industry viewed the move as a serious misstep.

  By mid-2009, the company's controlling shareholder, Education Media and Publishing Group Limited (EMPG), was in restructuring talks with its unsecured-debt holders. The royal family of Dubai, through their Istithmar World Capital investment vehicle, became major stakeholders in the process. Estimates placed the company's total debt reduction at moving from $7.3 billion to $6.1 billion. On the 15th of August 2009, CEO Barry O'Callaghan confirmed that the refinancing had received approval from more than 90% of lenders.

  The final restructuring, completed on the 10th of March 2010, reduced debt levels by approximately 60% and cut annual interest payments by over 75%. New equity investment totaling $650 million came from institutional investors including Paulson and Co. and Guggenheim Partners. According to the Irish state broadcaster RTÉ, the old equity investors based in Ireland lost their entire investment. The former shareholders were left with warrants covering 5% of the company, exercisable only if the company's value recovered to the level set at the time of the Harcourt merger. The Irish Independent reported that the old shareholders were denied a meeting to vote on or discuss the restructuring. Alongside the capital overhaul, HMH announced a $100 million Innovation Fund to invest in the next generation of education technology.

• 6. Catalog, Culture, and Controversy

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  The HMH catalog ranges far beyond school textbooks. The company held the rights for United States distribution of J.R.R. Tolkien's works and published The Handmaid's Tale by Margaret Atwood in its e-book edition in 1987. The Curious George series, The Little Prince, and the Peterson Field Guides all sat under the same corporate roof as CliffsNotes and Webster's New World Dictionary, the latter acquired in 2012 along with the culinary and reference portfolio of John Wiley and Sons.

  In 2014, the company sponsored Curious George on PBS Kids, replacing Chuck E. Cheese as the show's sponsor. That same year HMH purchased Channel One News on the 13th of May. In 2015, the company found itself in an unusual position when it struggled to find a charity willing to accept the royalties generated by its publication of Adolf Hitler's Mein Kampf.

  On the 29th of March 2021, The Wall Street Journal reported that HarperCollins, a division of News Corp, had agreed to purchase HMH Books and Media for $349 million. The deal included the trade publishing division and the video game franchises Carmen Sandiego and The Oregon Trail. The transaction closed on the 10th of May that year. With the trade division sold, HMH turned its focus entirely to digital-first educational publishing.

• 7. Going Private

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  HMH had gone public in November 2013, but less than a decade later the company was heading in the other direction. On the 22nd of February 2022, Veritas Capital, a New York-based private equity firm, announced a tender offer to acquire HMH at $21 per share, or roughly $2.8 billion in total.

  The offer generated market activity almost immediately. Before the tender deadline, more than 36,000 contracts were traded for the June 17 $22.5 strike price call options, as investors bet the $21 offer was undervaluing the company. The tender deadline was originally set for the 1st of April, then extended to April 6th. On the 6th of April 57% of outstanding shares were tendered, the offer went through, and HMH was taken private. The stock was subsequently delisted from Nasdaq.

  In April 2023, now under Veritas Capital ownership, HMH acquired NWEA, a not-for-profit academic assessment organization. The acquisition continued a thread running from the company's earliest decades: since Houghton Mifflin first partnered with ACT founder Everett Franklin Lindquist in 1916, the business of measuring student learning had never been far from the center of what the company does.