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Posts Tagged ‘Harcourt Education’

Pearson Cleared by OFT for Harcourt Education Acquisition

Pearson‘s acquisition of Harcourt Education in the UK has escaped a possible referral to the Competition Commission, according to the Bookseller. In a statement put out Friday, the Office of Fair Trading said it had decided, based “on the information currently available to it”, not to refer the completed merger to the Competition Commission. It did not go into further detail, but added that the text of the decision would be placed on the Office of Fair Trading’s web site at www.oft.gov.uk soon.

Pearson Education acquired Harcourt Education from Reed Elsevier in May for $950m. But the OFT announced in June that it was considering whether the deal would result in “a substantial lessening of competition” in the UK’s educational publishing market, forcing Pearson to put its integration plans on ice

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Reed Pondering Acquisition Options

After selling off Harcourt Education to Houghton Mifflin Riverdeep – in which it still has an 11.8% shareholder stake – Reed Elsevier said it would take another look at its balance sheet once the two Harcourt disposals complete, according to the Telegraph. One way is to sell off that minority share and borrow more money for further acquisitions. “We do recognise that when education completes we are in a new situation and we should look at this again,” said Reed CEO Sir Crispin Davis.

Houghton Mifflin Riverdeep is buying Reed’s US schools business for $4bn, while Pearson has agreed to buy the Harcourt assessment wing for $950m. Both deals should complete by the first half of 2008. Lorna Tilbian, an analyst at Numis Securities, said: “A strong case can be made that Reed is underleveraged and we believe there is scope for the group to increase its rolling share buyback”. The recent flurry leaves Reed focused on its science and medical education wings, which Davis is primarily happy about. “I have no ambition to go into any new sectors,” he said, adding he was particularly interested in acquisitions within online health and risk management, where “credit card fraud and employee screening are fast-growing areas”.

Riverdeep, Mergers High

The New York Times rightfully wonders just who on earth is this Barry O’Callaghan guy and why he’s not only bought up Houghton Mifflin but now Harcourt Education, thereby turning a small Irish software company into a giant American textbook publisher. Until last year, writes Eric Pfanner, Riverdeep was a relatively small software company, best known for educational programs like Reader Rabbit. If the Harcourt acquisition is completed, the company would vault past McGraw-Hill and Pearson to become the biggest textbook publisher in the United States.

So how did that happen, especially as Wolters Kluwer, Pearson and Reed have been involved in high-profile acquisitions and sales of their own? Analysts say private equity has been attracted to the educational business by steady cash flows, a relative lack of competition and expectations that spending will increase in the coming years as states like California step up textbook replacement programs – but big companies are anxious to sell because educational publishing has lagged behind areas like medical, legal and scientific publishing in the shift to digital distribution.

In comes a company like Riverdeep, where O’Callaghan sees an opportunity to bring into the future an industry long dominated by a handful of big players. “The idea of marrying content with technology holds strategic appeal,” said Drew Crum, an analyst at Stifel Nicolaus in Cleveland. But as the Sunday Business Post reports on what may prove to be the merger’s biggest stumbling block: although valued at $11 billion, the enlarged company has debts of $7.4 billion, according to analysts, and company president Jeremy Dickens admitted there would be an annual interest bill of $400 million. Hence the 11.8 percent stake in HM Riverdeep by Reed to inject some degree of stability. The question is, how far and how long?

OFT Confirms Investigation Into Pearson Acquisitions

The Bookseller reports this morning that the Office of Fair Trading has confirmed that Pearson has agreed to run Harcourt Education as a separate business until the conclusion of its investigation into the group’s purchase of the education unit previously owned by Reed Elsevier. John Fallon ,CEO of Pearson Education Asia, Europe, Middle East and Africa, said the group had anticipated the OFT’s interest: “We always knew that we would have to run the businesses separately until the OFT had time to look at the acquisition. The OFT enquiry is a matter of course in that, as Harcourt is the market leader in the UK, we fully expected that the OFT would want to look at the acquisition.”

OFT mulls Pearson’s Harcourt buy

The Bookseller’s Alison Bone reports that the Office of Fair Trading is considering whether Pearson Education‘s $950 million acquisition of Harcourt Education from Reed Elsevier will result in “a substantial lessening of competition” in the UK’s educational publishing market. The deal, unveiled in May, gives Pearson Education about 23% of the UK schools market, more than former market leaders Oxford University Press and Nelson Thornes.

The OFT is asking for representations from interested parties by 4th July. If it finds the deal has created a “relevant merger situation”, it will then consider whether the deal could “result in a substantial lessening of competition” in the UK, and if it should be referred to the Competition Commission for further investigation.

Reed Trades Harcourt Education Units to Pearson

The Independent reports that Pearson has bolstered its US assessment and international text book divisions after purchasing two Harcourt units from Reed Elsevier in a $950m deal. The acquisitions of the Harcourt units, which Reed put up for sale in February, follow a spate of activity in the education publishing market with Thomson and Wolters Kluwer also exiting the market.

Pearson has snapped up Harcourt Assessment, a Texan-based exam-testing company, to bolster its existing US assessment business. The testing market has been given a fillip by the “No Child Left Behind” Act in the US that has seen education authorities invest in more stringent testing, but the sector has been hit by local difficulties. Harcourt has recently lost key contracts in the testing space due to problems marking exams. In November, Reed warned that the business would miss its annual growth target for the second consecutive year. Pearson has also purchased Harcourt Education International, an Oxford-based publisher of text books that sells into markets including the UK, Australia, New Zealand and South Africa. Pearson has previously said it wanted to expand its education publishing business internationally.

The sale of the businesses is expected to complete in stages following regulatory review by the relevant authorities where required, which is also why Reed won’t be buying any more of Harcourt’s arms – so as not to upset the reg board…

Reed To Sell Harcourt Education Arm

Continuing a theme of “anything is for sale,” Reed Elsevier, mirroring moves by major Dutch and U.S. rivals, said it would sell its education arm as it focuses on faster-growing markets such as legal, medical and scientific electronic publishing. Analyst estimates suggested the sale of Harcourt Education could fetch between 1.6 billion and 2.4 billion pounds ($3.2-$4.7 billion). The Telegraph reports that Sir Crispin Davis, chief executive of business publisher Reed Elsevier, expects strong interest from private equity bidders, and indeed, one such bidder – Irish entrepreneur Barry O’Callaghan, who as CEO of Riverdeep already bought out Houghton Mifflin earlier this year – has expressed interest, according to Forbes.

Alastair Osborne sees the larger theme of companies exiting the education business in droves, and comes up with some reasons, including the No Child Left Behind Act and students’ increasing reliance on web-based materials. Such companies, Osborne says, are left with a “stark choice: invest in technology and systems that power interaction between their content and the network (such as school planning, administration and assessment) or exit the business now while valuations remain attractive.