Updated from 10:23 a.m. EDT
Educational books publisher
said Monday that it had hired an investment bank to explore its strategic alternatives, including a potential sale of the company.
The Chestnut Hill, Mass.-based company attributed its flat stock price for its move to hire
Goldman Sachs & Co.
"Harcourt General's value in the public market does not presently reflect the quality of its businesses, record results and bright prospects of the company," said Richard A. Smith, general chairman, in a statement. "As our management team evaluated this situation, it became clear that in keeping with our long history of focusing on shareholder value, we should examine all possibilities."
Smith and his family own roughly 28% of the company.
Harcourt settled up 30%, or 12 201/256, to 54 13/16, after reaching a new 52-week high of 56. The stock has traded between 32 5/8 and 44 172/256 over the last year.
David Nadel, managing director and equity analyst at
, said that if the company is indeed sold, he would expect the purchase price to be between $65 and $70 share. The company has 73.7 million shares outstanding, which would result in a deal worth at least around $4.8 billion.
Nadel said that strictly based on the sum of its parts, Harcourt is probably worth around $55 a share. "My view is, the Smith family is not going to sell for under $65 to $70 a share," said Nadel, who rates the stock a buy. His firm has not done any underwriting for the company.
Analysts estimate that the company is trading well below its true value and blame investor confusion over the company's business mix. In 1999, Harcourt General spun out its
retail unit to shareholders.
The company beat analyst estimates for the second quarter, posting a narrower loss than consensus expectations, and reported 16% revenue growth.
Coming up with a list of potential buyers is tricky, Nadel noted. The most natural strategic acquirers would be book publishers
and British media company
, but both those companies would run into a host of antitrust problems if they were to make a bid for Harcourt, Nadel said.
The company is moving into a period of accelerating earnings and strong cash flow, which could make it an attractive target for financial buyers, added Nadel, who said he does believe the company will be sold.