Monday, October 30, 2000

Thomson Corp. and Reed Elsevier Split Harcourt General in Publishing Mega-Deal By GOLDIE BLUMENSTYK A giant three-way deal announced on Friday in the publishing industry will solidify the Thomson Corporation as a major force in higher-education publishing. Reed Elsevier will buy Harcourt General for $5.6-billion, and Thomson will acquire the Harcourt divisions that deal with higher-education publishing and its new distance-education university for $2.06-billion. The Harcourt higher-education divisions will become part of Thomson Learning, the division of the Toronto-based company that also includes the testing business Prometric, which Thomson bought in March from Sylvan Learning Systems. Thomson will also acquire Harcourt's information-technology training company, NETg. Reed Elsevier will keep Harcourt's elementary- and secondary-school publishing imprints, its corporate and professional divisions, and its scientific, medical, and technical publishing group, which includes Academic Press. Robert S. Christie, president and C.E.O. of Thomson Learning, said the acquisitions create "a great opportunity" for his company. In college publishing, "distance education is probably one of the greatest growth opportunities there is," he said. With the Harcourt acquisitions -- and their $750-million in annual revenues -- Thomson Learning said its overall revenues would amount to $1.7-billion. Thomson would remain the second-biggest higher-education publisher in the world, behind Pearson PLC, the British giant. In recent years, Pearson, Thomson, and many smaller publishers have been trying to expand their product lines beyond textbooks, with many creating online content, complete Web-based courses, and even back-office operations to help institutions manage such activities as marketing and registration. Mr. Christie said that developing digital products and online courses, which both Harcourt and Thomson were doing, would continue. But he wouldn't say definitively whether Thomson would continue Harcourt's degree-granting distance-education venture. He said he still believes that "degree-granting responsibilities belong to the experts in that area," and noted that Thomson had not pursued such an approach itself. He said he and others from Thomson would talk with the Harcourt officials who had been running the new university to try to understand the value they see in it. When they authorized the virtual university to begin operations this past summer, Massachusetts higher-education officials took into account the possibility that a new owner might not continue the institution. Industry observers said the deal, the latest sign of consolidation in publishing, would strengthen the influence of big publishing in higher education. "Now the Big Four is the Big Three," said Peter J. Stokes, executive vice president at the education-research company Eduventures, referring to Pearson, Thomson, and McGraw-Hill. With "content" becoming increasingly crucial in this era of digital delivery, and fewer and fewer players holding control over the means to package and deliver it, education-oriented businesses will soon realize that having a relationship with a publisher will be a distinct competitive advantage, he said. And "not having one could be a distinct competitive challenge." Mr. Stokes, who considers Pearson's recent forays into higher education a significant development, said these latest deals show that the competition remains heated. Now, he added, "it's McGraw Hill's turn to do something significant." Reed Elsevier, an Anglo-Dutch company based in London, is paying $59 a share for Harcourt's stock and is also assuming about $1.2-billion of the company's debt as part of the overall purchase price. Reed Elsevier is known for its many interests in scholarly publishing. Harcourt, which has its headquarters in suburban Boston, has been for sale since June. Thomson, which had developed its bid with Reed Elsevier and was primarily interested in Harcourt's college businesses, is paying Reed Elsevier for its part of the deal in cash. Background articles from The Chronicle: Harcourt's Virtual College Readies Launch (9/8/2000) Pearson's Publishing Rivals Come on Strong (9/8/2000) How a Publishing Empire Is Changing Higher Education (9/8/2000) Moving Beyond Textbook Sales, Harcourt Plans to Open a For-Profit University (6/4/1999) Easy-to-print version E-mail this article

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