Company will divest $35 million in assets; deal with Hicks, Muse is off

Approximately six months after announcing its intention to acquire the educational and professional and reference publishing divisions of Simon &Schuster, Pearson has finally been given the green light by the U.S. Justice Department to go ahead with the deal. As a result, the acquisition was scheduled to close last Friday, November 27.

Following the protracted government review, Pearson has agreed to divest itself of an elementary science program plus 55 out of a total of 35,000 higher-education titles. These higher education titles are in the engineering, biology, economics and teacher education areas. All the titles to be divested have combined annual sales of approximately $35 million.

Pearson will pay $4.6 billion to acquire the various S&S divisions, which, in 1997, had total sales of $1.9 billion and operating profits of $246 million (News, May 25). The company, however, will not move forward with its plan to sell the reference and business and professional units to the investment banking firm of Hicks, Muse, Tate &Furst. According to Pearson, the two parties could not reach agreement on a final price. Hicks, Muse had originally agreed to acquire the units for $860 million; however, there had been recent rumors that the firm was having second thoughts about the purchase due to the publishing divisions not meeting their projected financial targets. According to its statement, Pearson terminated discussions with Hicks, Muse because the company wanted to renegotiate the price, financing and timing agreed to in the contract signed July 3.

With the Hicks, Muse deal off, the Macmillan computer publishing business will become part of the technology publishing group within Pearson's higher education business. The general and library reference and business and professional publishing operations will be brought together into one business unit within Pearson Education.

Although there has been constant speculation that Pearson would sell the units to another company if the deal with Hicks, Muse fell through, Pearson Education CEO Peter Jovanovich said that may not be the case. "We had always intended to buy the entire operation. They are good businesses and a good fit with our operations," Jovanovich told PW, adding that it is far from certain that Pearson will look to sell off any units.

Jovanovich also explained that further announcements regarding the structure of the new company will be made this week.