Champion of Untried Talent : Harper, in Takeover War, May Vanish as Publisher

Harper & Row, the 170-year-old New York publishing house, is almost certain to succumb to one of two hostile takeover bids launched against it this week, analysts said Thursday, and with it will vanish one of the last remaining independent publishers that traditionally take the time to cultivate the young, the eccentric and the experimental in literature.

Harper--once home to such writers as Herman Melville, James Thurber, E.B. White and Robert Benchley--was, in Wall Street’s jargon, “put in play” on Monday when New Jersey businessman and author Theodore Cross made a surprise $150-million acquisition bid.

Cross’ bid was made only three weeks before Harper was to hold a special meeting at which it hoped its shareholders would approve a new corporate structure designed to thwart such takeover attempts.

But, on Wednesday, giant Harcourt Brace Jovanovich Inc., already one of the world’s largest publishers, raised the ante to $220 million in cash.

Now, according to publishing industry analysts, the price is so high that Harper probably cannot resist selling out, even though it has fought mightily throughout its history to remain an independent publisher--a determination it reiterated in a statement after receiving Cross’ bid.

Harcourt, Brace’s offer of $50 a share is more than double what Harper shares sold for Monday morning on the New York Stock Exchange--a profit to shareholders so great that Harper management would risk a lawsuit accusing it of failing in its financial duty to stockholders if it managed to thwart the takeover, said Barry A. Gluck, managing director of research for the brokerage house of Ladenburg, Thalmann & Co. in New York.

“The chances now are very likely that Harper & Row will be acquired,” Gluck said. If neither Cross nor Harcourt succeeds in buying it, other suitors may come forward.

However, the implications of a takeover of Harper have raised concerns in publishing circles.

Few Independents Left

After a wave of consolidation over the last year, Harper is one of the last independent publishing houses. Others include Houghton Mifflin Co., Thomas Nelson Inc. and Addison-Wesley Publishing Co.

Last fall, the giant West German publishing company Bertelsmann bought Doubleday & Co., for more than $500 million.

That is one reason the Harcourt bid for Harper is so high--nearly 30 times its profits per share--far beyond the traditional yardstick that a publisher is worth 10 times profits.

Particularly in fiction publishing, many believe that such consolidation has serious effects on the types of works published.

“People think that if there are fewer houses you have fewer chances” to get published, author Joan Didion said. “I try not to think about the economics of publishing because they are so bleak.”

‘Not Good for New Authors’

“This is certainly not good for new authors,” said Ivan Obolensky, a former publisher who worked with Didion and writer Carlos Fuentes and is now a publishing analyst. Younger writers often require more work, involve more risk and “sometimes you didn’t expect to make your money back for 10 or 15 years,” he said.

Given the high price being offered for Harper, the new owner would have to make strong profits to pay back the debt.

“Big publishing houses are more cautious, they want brand-name writers” who guarantee profits, said Virginia Barber, a literary agent whose authors include Alice Munro, MacDonald Harris and Nicholas Von Hoffman. “It seems easier for eccentricity to survive in small publishing houses, and good literature thrives on being able to accept the eccentric, the new, the different.”

In other types of writing, however, such as textbooks and professional publications, research suggests that concentration does not stifle innovation, said J. Kendrick Noble Jr., an analyst from Paine Webber Mitchell Hutchins.

Harper shares jumped $16 to close at $49.50 Thursday, a sign of Wall Street’s enthusiasm for a takeover.

Harper indicated Wednesday that it may raise antitrust questions about Harcourt Brace’s bid. But the Reagan Administration has rarely intervened in corporate mergers, analysts noted, and the antitrust issue should offer little obstacle. A combination of Harper and Harcourt would account for roughly 10% of the U.S. book publishing business, analysts estimated, and would push Harcourt from sixth to second among the nation’s publishers, smaller only than Simon & Schuster, owned by Gulf & Western.

Firm Ranked Third

Harper last year ranked third behind Random House (owned by Advance Publications) and Simon & Schuster in the number of hard-cover consumer books sold, according to the industry newsletter BP Reports.

Among Harper’s recent best sellers are “The Triumph of Politics” by former Reagan Administration Budget Director David A. Stockman and “The Search for Intelligent Life in the Universe” by Jane Wagner. Its strong paperback division scored well with “The Man Who Mistook His Wife for a Hat” by Oliver Sacks.

If Harper is acquired, it would end nearly a quarter century of effort to stop such an unwanted event. In the 1960s, when publishing companies such as Random House and Simon & Schuster were acquired by conglomerates, then-Harper President Cass Canfield sold off shares to allies and brought in professional managers, such as the current chairman, Brooks Thomas, who he thought could protect the company from Wall Street’s sharks.

Harper was founded in 1817 by brothers James and John Harper, who had been inspired to become publishers after reading Benjamin Franklin’s autobiography. It became Harper & Row after acquiring Illinois textbook publisher Row, Peterson & Co. in 1962.

In 1844, James Harper was elected mayor of New York, although he returned to publishing after one term. By 1853, the company had become the biggest book publisher in the world. Among the titles it published in 1851 was Melville’s “Moby Dick.”

Started Magazines

The company started Harper’s New Monthly Magazine in 1850, Harper’s Weekly in 1857 and Harper’s Bazaar (aimed at women) in 1867. The monthly Harper’s and Harper’s Bazaar survive today, although Harper & Row no longer owns them.

Its inventory of enduring works that continue to sell, especially in profitable hard cover, is among its most valuable assets, analysts said, and has given Harper a solid financial base on which to build.

Obolensky said one reason Harcourt is interested in Harper is because its own hard-cover book business is languishing.

Wall Street analysts were divided on whether Harcourt’s bid is high enough to preempt still other suitors. Gluck said publishing houses in England, Germany or Japan may try to buy the firm, because the low value of the dollar makes American companies a bargain for foreign purchasers and because this may be the last chance to buy an independent publisher.