Reed Elsevier, the information and publishing group, offloaded its troublesome American educational business for $4 billion (£1.96 billion) last night to the acquisitive Barry O’Callaghan without formally conducting an auction.

The disposal of Harcourt is the second time in weeks that Reed has opted for a preemptive sale, after the $950 million sale of its international educational arm to Pearson.

Although the intention to sell its education units was announced in February, a memo to buyers was never issued. Reed believes that it could not have achieved a better price at open auction, because both purchasers can bring synergies to bear.

About $4 billion of the overall proceeds will be returned to shareholders via a special dividend.

Mr O’Callaghan’s success positions his group as the main rival to Pearson in the global education publishing market. Last year the Irishman, who is the chairman and largest shareholder, merged his Riverdeep company with the private equity-controlled Houghton Mifflin in a $5 billion deal.

Reed is also taking a $300 million stake in Houghton Mifflin Riverdeep Group, which will leave it with an 11.8 per cent of the common stock in the enlarged company. Houghton Mifflin Riverdeep is privately held, with a range of backers including the Irish stockbrokers J & E Davy. Existing investors put up $23 million of equity financing to help to meet the $3.7 billion cash requirement for the purchase.

Reed Elsevier opted to sell Harcourt after an unhappy six-year period of ownership. Its other three divisions – professional publishing, scientific information and legal – have all performed well.

That led to speculation that Reed could become a target for private equity bidders, who could extract value from a break-up of the company, but that would appear to be less likely now.

Sir Crispin Davis, the chief executive of Reed Elsevier, said that the price “recognises the exceptional quality of the Harcourt assets” and added that the company would focus on developing digital “in our chosen markets”. Reed shares rose 11p to close at 675p, although the deal was announced after the market had closed.

Booking strong profits

— Reed Elsevier bought Harcourt Education division in July 2001 for $2.1 billion

— Harcourt Education is a publishing company serving the under-12 market in the United States

— It also provides educational and psychological testing in the US, the UK and France

— Harcourt Education division reported total revenues of $1.6 billion in 2006

— It reported operating profits of $238 million, of which the Harcourt US Schools Education business contributed $228 million

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