Debt-laden Vivendi Universal announced plans Aug. 14 to sell of $9.8 billion in assets, including educational publisher Houghton Mifflin Co. The announcement carries significant weight for the company’s K-12 school customers, which include users of educational software from Sunburst Technology and Knowledge Adventure, now a division of Sunburst.

The sell-off signals the first step to break up the French media and entertainment conglomerate constructed in a two-year buying spree by former chairman Jean-Marie Messier.

Messier was ousted in July, leaving Vivendi struggling under $18.6 billion in debts. Messier’s replacement, Jean-Rene Fourtou, has since been seeking to reduce the company’s borrowings.

Analysts say it’s too soon yet to tell whether the sale of Houghton Mifflin, which Vivendi acquired for $1.7 billion in 2001, will have a direct impact on the throngs of products and services it sells to schools throughout the world.

Besides textbooks, assessments, and supplemental materials, these products include software titles such as Type to Learn, Hyperstudio, and the JumpStart series of school software.

In the near term, however, the sale could be both good and bad for Houghton. The company no longer will carry the stigma of its financially troubled parent, but it will have to stay focused through a series of potentially hazardous leadership changes, said Adam Newman, director of research for financial analysis firm Eduventures Inc.

“Despite the turmoil surrounding Vivendi, Houghton continues to perform well,” Newman said. The sale should help the publisher put some distance between itself and the slimming conglomerate.

But that’s not to say there won’t be problems, he said. According to Newman, fear and uncertainty are not uncommon when companies undergo critical shakeups in leadership.

“It’s a real people issue,” he said. “The company does not want to experience a flight of talent. The real challenge is whether the new leadership can provide the energy that will be needed to really rally the folks who are there.”

In light of Houghton’s continued strong performance in the education market, Newman said he doesn’t expect Vivendi will have trouble securing a buyer.

But “the transaction is going to be driven by Vivendi’s needs,” Newman said. The company is thirsty for quick cash to pay down its ballooning, multibillion-dollar debt and is likely to accept whichever bid promises the most money up front, he said.

Ideally, Vivendi would stand to make a better profit by breaking Houghton up and selling it in pieces. But Newman thinks an all-or-nothing deal is more likely, given Vivendi’s immediate need for cash. “At the end of the day, it’s going to be Vivendi’s cash constraints that are going to drive this deal,” he said.

As for Houghton’s school customers, Newman said it’s unclear what the transaction might hold. But drastic changes, he said, are unlikely.

“Any time you have an acquisition, there is the potential for minimal as well as drastic change,” he said. But with a company like Houghton, which has done well, there often is little need to disrupt its relationships with customers by shaking things up and eliminating services.

Vivendi’s plan to dispose of at least $9.8 billion in assets—$4.9 billion of them in the next nine months—was approved by Vivendi directors at a board meeting on Aug. 13, the company said in a statement.

Messier tried through costly acquisitions to transform Vivendi, once a humble water company, into a world-leading media giant to rival the likes of AOL Time Warner Inc. His ambitious plans and glitzy lifestyle initially saw Messier hailed as a French business marvel. But his reputation took a dive as Vivendi racked up huge debts and massive losses.


Vivendi Universal

Houghton Mifflin Co.

Sunburst Technology

Eduventures Inc.