Wiley Exchanges Trade For Development

The second quarter of fiscal 2013 proved to be a watershed period for what had been known as the professional/trade group at John Wiley & Sons. Since announcing in March that it was looking to divest its most consumer-oriented properties, Wiley sold the two largest parts of the business to Google and Houghton Mifflin Harcourt. Executives in a conference call with analysts last week said that while Wiley is in conversations with potential buyers for the remaining assets, it has stopped acquiring new titles in those areas although it will continue to support the books it has acquired and published.

The two divestitures to date earned Wiley $33 million, and the remaining properties, CFO Ellis Cousins acknowledged, will yield modest prices. Revenue from the properties sold or to be sold totaled $78 million in fiscal 2012—down from $85 million in fiscal 2011—putting the sale multiple at roughly 0.5 times revenue; before the recession and the growth in digital sales, trade properties tended to sell for about one times revenue. And Wiley paid much steeper multiples for the companies that it bought to bolster its stake in the professional career development field as it largely exits the trade publishing segment. In February, Wiley paid $85 million for Inscape, which has annual revenue of about $20 million, and last month it paid $24 million for Electronic Learning Systems, which has annual sales of approximately $7 million Books are not the main product of Inscape or ELS; rather, they provide digital tools and services to professionals in a variety of businesses. Wiley believes its two new businesses will provide faster growth and higher margins than its old trade book lines. The combination of the divestitures of its consumer business and the acquisition of Inscape and ELS prompted Wiley to change the name of the professional/trade group to Wiley professional development.

Wiley made a third major acquisition in calendar 2012, buying Deltak.edu in October for $220 million. With annual sales of about $54 million, Deltak is now part of Wiley’s global education group. In last week’s conference call, Wiley executives made it clear that more change is coming to the higher education business to accommodate what Wiley sees as a sudden acceleration in the move from print to digital in the college and other higher education markets. Those changes will likely come in the form of restructuring existing operations to lower costs as executives said that, with the exception of some possible portfolio fine-tuning, they don’t expect to make any more divestitures.

Forming the Wiley Professional Development Group