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News Corporation (NWSA) Buys Houghton's Books & Media Unit

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News Corporation (NWSA - Free Report) has always been keen on expanding business through strategic buyouts. Progressing along these lines, the company concluded its previously-announced acquisition of Houghton Mifflin Harcourt’s (HMHC - Free Report) Books & Media segment for $349 million in cash. Markedly, the acquired Books & Media business will be operated by News Corporation’s subsidiary, HarperCollins Publishers.

Notably, Houghton’s Books & Media business boasts an extensive backlist of over 7,000 titles as well as an important frontlist in the lifestyle and children’s categories. Some of its well-known titles include Curious George, The Polar Express, Little Blue Truck and The Little Prince among others. Apart from these, the deal also gives HarperCollins U.S., rights to J.R.R. Tolkien’s creations including global English language rights to The Hobbit and The Lord of the Rings trilogy.

In an earlier press release, management had highlighted that HarperCollins expects to witness cost and revenue benefits from this deal. It had anticipated generating immediate cost savings, accumulating to more than $20 million yearly within two years of the acquisition. Efficiencies across manufacturing, distribution and other cost activities were likely to contribute to savings.


Certainly, the addition of Books & Media’s backlist and frontlist coupled with its expertise in digital development, positions HarperCollins to better serve authors and audiences globally. Also, Books & Media’s impressive audiobooks business is likely to add value to HarperCollins’s growing audiobook revenue stream. Well, News Corporation highlighted that the deal bodes well especially as several people are reading and listening to books in the current environment.

What Else You Should Know?

News Corporation is diversifying its revenue streams through strategic acquisitions and operational enhancement. On May 5, News Corporation acquired Investor’s Business Daily (“IBD”) from O’Neil Capital Management. 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.

In March, REA Group entered into an agreement to acquire Mortgage Choice Limited, for approximately A$244 million in cash (nearly $186.5 million based on exchange rates as of the date of announcement). The buyout is expected to close in the fourth quarter of fiscal 2021. These moves along with multi-year agreements with Alphabet Inc.’s (GOOGL - Free Report) Google and Facebook, Inc. (FB - Free Report) indicate that News Corporation is undertaking prudent efforts to drive growth across its portfolio.

In March, the company reached a three-year agreement with Facebook, as part of which News Corporation will receive payments in lieu of 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. In February, News Corporation announced that it has entered into a three-year partnership with 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.

News Corporation, which currently carries a Zacks Rank #2 (Buy), has surged 67.4% in the past six months compared with the industry’s 25% rally. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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