Bass Group Offers $1.5 Billion for 90% of Macmillan

Robert M. Bass Group on Tuesday offered $1.5 billion to buy 90.9% of Macmillan Inc., a leading textbook publisher that has been the subject of recurrent takeover rumors for more than a year.

In a letter to Macmillan Chairman Edward P. Evans, the Texas investor group said it already holds a 9.1% stake in the company and may increase its $64-a-share offer after talks with Macmillan management. Macmillan executives were said to be meeting Tuesday evening and had no immediate public response.

Bass Group said its offer for Macmillan’s 26 million shares was contingent on approval by Macmillan’s board and on the company dropping plans to issue new shares of preferred stock. A vote on the issuance of those shares is to be held at the company’s annual meeting, scheduled for today.

Bass, which described its offer as “friendly,” said the proposal is also contingent on the group receiving necessary financing. But Bass added that it already has some $250 million available to purchase Macmillan equity and subordinated debt.

Successful Subsidiaries

Textbook publishers have stirred acquisition interest in the past several years because of their steady growth at a time when the American school-age population is increasing. Textbook publishers’ profit margins are generally in the high teens, compared to margins in the low teens for other kinds of book publishing, noted John W. Walsh, an analyst with Fitch Investors in New York.

Under Evans’ leadership, Macmillan has also done well in its other businesses, which include popular hardback books, information services, retailing (Gump’s), language schools (Berlitz) and secretarial schools (Katharine Gibbs). Macmillan has purchased 12 companies in the past 1 1/2 years.

Bass Group is completing its takeover of Bell & Howell Corp. Like Macmillan, Bell & Howell is a textbook publisher that also offers information services. On Tuesday, Bell & Howell shareholders approved the $702-million buyout.

Macmillan, which until recently also held a stake in Bell & Howell, last year earned a record $68 million on $956 million in revenue. Takeover-minded concerns may be enticed by Macmillan’s “excess cash flow”--cash flow after dividends and capital outlays--of about $100 million a year, analysts have noted.

Several analysts speculated that Macmillan would reject the $64-a-share offer, noting that prevailing Wall Street opinion puts Macmillan’s breakup value as high as $90 a share.

Bruce Benteman, a research analyst at Wealth Monitors, an investment newsletter in Kansas City, Mo., speculated that Bass might be happy to buy Macmillan at the current low price or to have a third party come in and buy his shares at a premium.

“He’d probably be happy to have it go either way,” Benteman said. “If he can pick up the company for $64 a share, great; if somebody else buys it for a higher price, that would suit him, too.”

Benteman said Evans is part of a wealthy family that might be able to apply considerable resources in a takeover fight. Evans himself owns about 2% of Macmillan’s shares.

Some estimates have placed the wealth of the Bass family at as much as $5 billion. Bass Group was a partner in the purchase of the Westin hotel chain just after last October’s stock market crash, and more recently the group has negotiated with the Federal Home Loan Bank Board to buy American Savings & Loan.

Wall Street rumors last year suggested that Robert Maxwell, the British press magnate, would soon launch a takeover bid for Macmillan. But the bid never materialized. Maxwell made an unsuccessful attempt to take over Harcourt Brace Jovanovich, a textbook and trade book publisher based in Florida.