$3.6 Billion Acquisition To Create World's Leading Education Business.LONDON--(BUSINESS WIRE)--May 18, 1998-- -- Proposed acquisition of Simon & Schuster Simon & Schuster U.S. publishing company. It was founded in 1924 by Richard L. Simon (1899–1960) and M. Lincoln Schuster (1897–1970), whose initial project, the original crossword-puzzle book, was a best-seller. education divisions from Viacom for a net price of $3.6bn - after selling Reference and Business & Professional divisions to Hicks Hicks , Edward 1780-1849. American painter of primitive works, notably The Peaceable Kingdom, of which nearly 100 versions exist. , Muse, Tate & Furst Incorporated for $1bn -- Combination of Simon & Schuster education and Addison Wesley Longman creates world's leading education business -- Value creating acquisition which will significantly enhance adjusted earnings in the first full year -- Strong platform for growth in rapidly expanding global education market -- Integration of the businesses will deliver annual cost savings of $130m by 2000 -- Initial financing through new $6bn group banking facilities -- Refinancing options include capital markets, disposals and new equity issuance In financial markets, an Equity Issuance is the sale of new equity or "stocks" by a firm to investors. Equity Issuance can involve a private sale, in which the transaction between investors and the firm takes place directly, or publicly, in which case the firm has to Commenting on the acquisition, Pearson's chief executive, Marjorie Scardino Dame Marjorie Morris Scardino, DBE, FRSA, (born 25 January 1947) is the CEO of Pearson PLC. She became the first female Chief Executive of a FTSE 100 company when she was appointed CEO of Pearson[1] in 1997. , said: "Education is one of the great growth industries of our time. This is a tremendous opportunity to meet, in print and electronically, the growing demand of students of all ages and in all parts of the world for stimulating and effective educational programmes. It is an earnings - enhancing and value - creating step in our strategy of focusing our resources on businesses where we have a market leading position. Creating the world's leading education business certainly fits the strategic bill." Peter Jovanovich, chief executive of Addison Wesley Longman, who will be CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of the new combined business, said: "Both companies have long and fine traditions of helping teach, enlighten en·light·en tr.v. en·light·ened, en·light·en·ing, en·light·ens 1. To give spiritual or intellectual insight to: and enrich children, young adults and professionals in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and throughout the world. The combination of the professional, intellectual, editorial and financial resources of our two companies means that we will be able to take this work forward even more effectively in the future." THE TRANSACTION Pearson plc, the international media group, announces it has signed an agreement with Viacom for the purchase of Simon & Schuster's Education, Reference and Business & Professional publishing divisions for $4.6bn. In 1997, these divisions had sales of $1.9bn, operating profits of $261m and net assets Net assets The difference between total assets on the one hand and current liabilities and noncapitalized long-term liabilities on the other hand. net assets See owners' equity. at 31st December of $858m. Pearson has entered into a preliminary agreement to sell to Hicks, Muse, Tate & Furst Incorporated (Hicks Muse), a leading US based private investment firm, the Reference and Business & Professional publishing divisions for around $1bn. Under the agreement, Pearson will continue to distribute their products outside the US. In 1997, the divisions being retained by Pearson had unaudited sales of $1.4bn and made operating profits of $210m. Pearson will combine the Simon & Schuster education divisions with Addison Wesley Longman to form the world's leading international education business. This will create a highly innovative, competitive and dynamic educational publisher capable of seizing the exciting opportunities offered by the fast growing global education market. The combination of the two businesses is expected to achieve synergies and economies of scale that will deliver annual savings of $130m by the year 2000. It will significantly enhance Pearson's adjusted earnings from the first full year and will earn a return in excess of Pearson's cost of capital. Initial financing for the acquisition will be met by $6bn of new bank facilities which will also be used to refinance existing facilities. Pearson anticipates that the transaction will be completed in the second half of 1998 subject to regulatory approvals, including the expiration of the Hart-Scott-Rodino waiting period in the US, and the consent of Pearson's shareholders. Pearson will send a circular to shareholders shortly to explain why the Board unanimously supports the acquisition, and to seek their approval at an extraordinary general meeting expected to be held in July. EDUCATION: A GROWTH MARKET The global market in educational materials and programmes has been growing at a strong rate, consistently outstripping GDP GDP (guanosine diphosphate): see guanine. growth. This growth is driven by favourable demographics; increased spending by governments, parents and students; a worldwide drive to improve educational standards; the increasing application of computers in schools and colleges; a greater priority being given to public education in developing economies; and increasing demand to learn English. The largest single market is the US, where some $7bn was spent on printed and electronic education materials in elementary, secondary and higher education higher education Study beyond the level of secondary education. Institutions of higher education include not only colleges and universities but also professional schools in such fields as law, theology, medicine, business, music, and art. in 1997. Outside the US, the international market in English language English language, member of the West Germanic group of the Germanic subfamily of the Indo-European family of languages (see Germanic languages). Spoken by about 470 million people throughout the world, English is the official language of about 45 nations. educational materials generates total revenues of around $16bn a year. Pearson management expects both markets to grow by some 10% a year. THE SIMON & SCHUSTER EDUCATION BUSINESS Simon & Schuster provides educational materials in a variety of media for students from pre-school through to adult learning. Its US school division, through the Silver Burdett Ginn and Prentice Hall Prentice Hall is a leading educational publisher. It is an imprint of Pearson Education, Inc., based in Upper Saddle River, New Jersey, USA. Prentice Hall publishes print and digital content for the 6-12 and higher education market. History In 1913, law professor Dr. School imprints, publishes K-12 school texts for all major disciplines in elementary and middle/high schools. It is the world leader in educational technology through the Computer Curriculum Corporation (CCC CCC A very speculative grade assigned to a debt obligation by a rating agency. Such a rating indicates default or considerable doubt that interest will be paid or principal repaid. Also called Caa. ) business. Globe Fearon and Modern Curriculum Press (MCP (1) See Microsoft certification. (2) (MultiChip Package) A chip package that contains two or more chips. It is essentially a multichip module (MCM) that uses a laminated, printed-circuit-board-like substrate (MCM-L) rather than ceramic (MCM-C). ) publish supplemental materials, especially for middle and high school students and teachers. Simon & Schuster is also the world's leading higher education business, serving the college and adult learning markets in the US and internationally with print, electronic and distributed learning Distributed Learning means a method of instruction that relies primarily on indirect communication between students and teachers, including internet or other electronic-based delivery, teleconferencing or correspondence; (British Columbia, School Act, 2006). products. Prentice Hall and Allyn & Bacon publish texts and related products in the major disciplines. Adult education imprints range from English as a second language (ESL (1) An earlier family of client/server development tools for Windows and OS/2 from Ardent Software (formerly VMARK). It was originally developed by Easel Corporation, which was acquired by VMARK. ) to career development and technical publications for institutional programmes. An extensive backlist back·list n. A publisher's list of older titles kept in print. tr.v. back·list·ed, back·list·ing, back·lists To place (a title) on a backlist. is the mainstay of the business, providing 85% of sales. ADDISON WESLEY LONGMAN Addison Wesley Longman (AWL), owned by Pearson, is a global educational publisher, selling books, multimedia and learning programmes in major academic disciplines to the primary, secondary, higher education and professional markets throughout the world. In 1997, it made operating profits of $98m on sales of $924m. Its chief executive, Peter Jovanovich, who joined the Group in September 1997, was previously president of McGraw-Hill's Education and Publishing Group. AWL's US school publishing group publishes materials and programmes for the K-12 school market under the Scott Foresman-Addison Wesley imprints. The group's publishing strengths are in reading, language arts language arts pl.n. The subjects, including reading, spelling, and composition, aimed at developing reading and writing skills, usually taught in elementary and secondary school. , social studies, mathematics and science. It also has an electronic education division and a supplementary publishing group. AWL's higher education group publishes books and multimedia products in many academic subjects for the US and international college markets through the Addison- Wesley, Longman, and Benjamin Cummings imprints. Its Longman English Language Teaching (ELT ELT English Language Teaching ELT n abbr (Scol) (= English Language Teaching) → Englisch als Unterrichtsfach ) business is a leading publisher of ELT materials in the world. In addition, its international group has a local language publishing presence as well as selling books and products from the AWL group all over the world. THE WORLD'S LEADING EDUCATION BUSINESS The combination of Simon & Schuster's education divisions and AWL will create the world's leading education business. It will be broadly based with extensive intellectual property rights, strong brands and internationally competitive positions. This will provide a solid platform from which to capitalise on the exciting growth opportunities both in the US and international education markets. US School The US school business, bringing together brands that are highly respected in classrooms throughout the US - Scott Foresman, Addison Wesley, Prentice Hall School and Silver Burdett Ginn - will be one of the leading US school publishers. Their complementary strengths will allow the newly combined business: -- to extend its range to cover all core disciplines throughout the elementary and secondary school sector; -- to extend its reach by having sufficient critical mass to support separate sales forces for elementary and secondary schools, enabling it to compete more effectively; -- and to benefit from a stronger backlist which should lift profits in the shorter term while full subject coverage and scale will drive sales growth in the longer term. US Higher Education The US college business will be the largest higher educational publisher in the US. It will: -- be able to capitalise on the benefits of publishing four of the most highly respected imprints in higher education - Prentice Hall, Allyn & Bacon, Addison-Wesley and Benjamin Cummings; -- cover a comprehensive and complementary range of subjects and disciplines; -- and be built around the management and business strengths of Prentice Hall, with its editorial focus on high quality and profitable publishing. International Outside the US, the combined business will be the leading international educational publisher, with complementary strengths that will enable it to capitalise on a range of opportunities for growth: -- AWL is the world's leading ELT business while Simon & Schuster leads the world in higher education; -- AWL's local language publishing infrastructure will be matched by Simon & Schuster's strengths in the translation and export of US programmes; -- and AWL's strong customer base in Asia and Europe complements Simon & Schuster's strong presence in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . Learning through technology In educational technology, the combined business will be the global leader of a market which is taking an increasing share of total educational spending: -- in schools, it will be able to build on a world leading position in providing electronic media for classrooms; -- and in higher education, it will be able to expand its already extensive Internet and technology capability both to augment textbooks and to provide unique teaching solutions. Management Upon completion of the acquisition, the combined businesses will be managed under the leadership of Peter Jovanovich, who reports directly to Pearson's chief executive, Marjorie Scardino. The new senior management team will be drawn from AWL and the Simon & Schuster divisions. Both management teams have substantial experience in the integration and running of educational publishing businesses. The new management team will work closely with education authorities both in the US and around the world to ensure that the newly combined business continues to meet the needs and expectations of its customers. Economies of scale The combination of the two businesses will create significant economies of scale and produce a strong cash flow to fund future growth. There will be substantial back office synergies from the integration of their respective shared services shared services, n.pl the administrative, clinical, or other service functions that are common to two or more hospitals or their health care facilities and used jointly or cooperatively by them. projects, as well as an opportunity to achieve substantial production, distribution, central management, property and IT savings. As a result, Pearson expects to achieve $130m of annual cost savings by the Year 2000. The one-off cost of the full integration of the two businesses is expected to be around $270m, which will be accounted for in the current year. In addition, Pearson anticipates write-offs of around $100m to allow for accounting policy alignment and the writing down of certain capitalised costs in respect of the regional shared services project. FINANCIAL EFFECTS The acquisition is expected to significantly enhance adjusted earnings in its first full year and is at a price that should provide shareholders a return in excess of the group's cost of capital. The effect of the acquisition on adjusted earnings in the current year will depend upon the closing date of the transaction. As stated in the 1997 Report and Accounts, in order to show results from operating activities on a comparable basis, any amounts charged to operating profits arising from the amortisation of goodwill will be excluded from the calculation of adjusted earnings. Although the acquisition will increase the proportion of group profits which arise in the US (where corporate tax rates are higher than in the UK), the impact of this should be offset by the use of existing tax losses in the US and tax relief for financing costs. The agreement provides for the consideration to be adjusted to reflect the seasonal variation in net assets between 31st December 1997 and completion. Any adjustment to the consideration is expected to be recouped from seasonal operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. . The three divisions of Simon & Schuster being acquired and retained by Pearson - School, Higher Education and International - have, over the last three years, achieved the following: $m Sales Operating Profits 1997 1,412 210 1996 1,307 211 1995 1,210 221 The figures shown above are all unaudited and have been prepared under Viacom's accounting policies. In addition, certain Simon & Schuster central costs have been allocated by reference to sales. FINANCING THE ACQUISITION The acquisition will be financed initially through $6bn of new bank facilities which comprise a $2.5bn five year reducing term loan, a $2bn five year reducing revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facility and a $1.5bn 364 day facility. Pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma net borrowing at 31 December 1997, after taking into account recent Pearson's acquisitions and disposals including the proposed sale of the reference and business publishing division to Hicks Muse would be 2.5bn. Pearson intends to reduce the level of borrowings through the on-going disposal of passive investments and businesses that lack critical mass or are likely to be worth more to others than to Pearson. Pearson will review the opportunities available to refinance the facilities which may include an equity issue of up to 10% of Pearson's existing share capital. Pearson expects that, for 1999, interest will be covered four times by operating profit. The contract with Viacom provides for a 70m payment in the event that shareholders do not approve this transaction. Pearson is being advised by Goldman Sachs The Goldman Sachs Group, Inc., or simply Goldman Sachs (NYSE: GS) is one of the world's largest global investment banks. Goldman Sachs was founded in 1869, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street. . The debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay has been arranged by Goldman Sachs and HSBC HSBC Hongkong and Shanghai Banking Corporation HSBC Humane Society of Broward County (Florida) HSBC Humane Society of Bay County (Bay County, Michigan) . Cazenove & Co. are acting as brokers to Pearson. NOTE TO EDITORS Pearson plc Pearson is an international media group. In addition to Addison Wesley Longman, its primary business operations Business operations are those activities involved in the running of a business for the purpose of producing value for the stakeholders. Compare business processes. The outcome of business operations is the harvesting of value from assets include the Financial Times Group, which is one of the world's most authoritative sources of general business news and analysis; the Penguin group, which is one of the world's leading consumer publishing businesses; Pearson TV, which is one of the world's leading independent international television producers; and the Tussauds Group, which is a leading developer and operator of paid-for attractions. Pearson also owns a 50% stake in The Economist Group, which publishes the Economist newspaper. In 1997, Pearson made group operating profits of 323m on sales of 2.29bn. It employs 18,000 people in over 50 countries, including over 5000 in the US, where it made sales of nearly 1bn in 1997. Hicks, Muse, Tate & Furst Incorporated Since its formation in 1989, Hicks, Muse, Tate & Furst has completed or currently has pending more than 200 transactions with a total capital value of approximately $29bn. Headquartered in Dallas, Texas “Dallas” redirects here. For other uses, see Dallas (disambiguation). The City of Dallas (pronounced [ˈdæl.əs] or [ˈdæl. , the firm also has offices in New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of , London, St Louis, Missouri, Mexico City Mexico City Spanish Ciudad de México City (pop., 2000: city, 8,605,239; 2003 metro. area est., 18,660,000), capital of Mexico. Located at an elevation of 7,350 ft (2,240 m), it is officially coterminous with the Federal District, which occupies 571 sq mi and Buenos Aires Buenos Aires (bwā`nəs ī`rēz, âr`ēz, Span. bwā`nōs ī`rās), city and federal district (1991 pop. . The businesses that Pearson has agreed to sell to Hicks Muse are: -- Reference Publishing, which is Macmillan's programme in computer, general and library reference materials. This list includes consumer, technical and professional computer titles and brands such as Betty Crocker's cookbook (programming) cookbook - (From amateur electronics and radio) A book of small code segments that the reader can use to do various magic things in programs. One current example is the "PostScript Language Tutorial and Cookbook" by Adobe Systems, Inc (Addison-Wesley, ISBN and Webster's New World Dictionary Webster's New World Dictionary of the American Language is an American dictionary first published in 1951 and presently published by John Wiley & Sons. The first edition was published by the World Publishing Company of Cleveland, Ohio in two volumes or one large . -- Business & Professional publishes "solutions" oriented books, periodicals and distance learning products for professionals with particular strengths in the areas of finance, healthcare, charities and business management. CONTACT: ENQUIRIES: 011-44-171-411-2310 Marjorie Scardino, chief executive John Makinson John Makinson is currently the Chairman and Chief Executive Officer of the publishers The Penguin Group. He is also a non-executive director of George Weston Limited in Canada. , finance director John Fallon John Fallon (born Cambuslang, 1940) was a goalkeeper for Celtic F.C., who was a member of the famous Lisbon Lions of 1967. Fallon was taken on as a junior by Celtic, and soon was promoted to cover for the famous eccentric keeper Frank Haffey. , communications director or (U.S. Only) Roy Winnick or Mark Semer Kekst and Company 212-521-4842 or 4802 |
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