-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CszMsFhdlsE7U8u2As08lccQS7hLwPqVUqJSV5FLkJ8LLPqVZ8rn/kqjC2ZAiehe Nw4N68cywRHZaSXeX6d1Wg== /in/edgar/work/0000950103-00-001187/0000950103-00-001187.txt : 20001031 0000950103-00-001187.hdr.sgml : 20001031 ACCESSION NUMBER: 0000950103-00-001187 CONFORMED SUBMISSION TYPE: SC TO-C PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20001030 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HARCOURT GENERAL INC CENTRAL INDEX KEY: 0000040493 STANDARD INDUSTRIAL CLASSIFICATION: [5311 ] IRS NUMBER: 041619609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC TO-C SEC ACT: SEC FILE NUMBER: 005-12340 FILM NUMBER: 748899 BUSINESS ADDRESS: STREET 1: 27 BOYLSTON ST BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 BUSINESS PHONE: 6172328200 MAIL ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CINEMA CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MID WEST DRIVE IN THEATRES INC DATE OF NAME CHANGE: 19660907 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: REH MERGERSUB INC CENTRAL INDEX KEY: 0001126977 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 00000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-C BUSINESS ADDRESS: STREET 1: C/O LEXIS DOCUMENT SERVICES INC STREET 2: 30 OLD RUDNICK LANE CITY: DOVER STATE: DE ZIP: 02140 BUSINESS PHONE: 000-000-0000 MAIL ADDRESS: STREET 1: C/O LEXIS DOCUMENT SERVICES INC STREET 2: 30 OLD RUDNICK LANE CITY: DOVER STATE: DE ZIP: 02140 SC TO-C 1 0001.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------- SCHEDULE TO (RULE 14d-100) Tender Offer Statement Pursuant to Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934 HARCOURT GENERAL, INC. (Name of Subject Company) REH MERGERSUB INC. REED ELSEVIER INC. REED ELSEVIER US HOLDINGS INC. REED ELSEVIER OVERSEAS BV REED ELSEVIER HOLDINGS BV REED ELSEVIER PLC REED INTERNATIONAL P.L.C. ELSEVIER NV (Offerors) COMMON STOCK, PAR VALUE $1.00 PER SHARE and SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK, PAR VALUE $1.00 PER SHARE (Title of Class of Securities) ----------------------- Common Stock (41163G101) Series A Cumulative Convertible Preferred Stock (41163G201) (Cusip Numbers) Henry Z. Horbaczewski, Esq. Reed Elsevier Inc. 275 Washington Street Newton, MA 02458 Telephone: (617) 558-4227 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons) Copies to: Joseph Rinaldi, Esq. Davis Polk & Wardwell 450 Lexington Avenue New York, New York 10017 Telephone: (212) 450-4000 CALCULATION OF FILING FEE Transaction valuation Amount of filing fee - ------------------------------------ ----------------------------------- N/A N/A |_| Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: N/A Filing Party: N/A Form or Registration No.: N/A Date Filed: N/A |X| Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: |_| third-party tender offer subject to Rule 14d-1. |_| issuer tender offer subject to Rule 13e-4. |_| going-private transaction subject to Rule 13e-3. |_| amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer. |_| ================================================================================ REED ELSEVIER ACQUISITION OF HARCOURT GENERAL INC 30 October 2000 AGENDA o Transaction Overview Crispin Davis o Financial Summary Mark Armour o Q&A Crispin Davis Mark Armour Derk Haank CEO, Science Issued by and the responsibility of Reed Elsevier. Morgan Stanley & Co Limited ("Morgan Stanley Dean Witter") which is regulated in the United Kingdom by The Securities and Futures Authority Limited, is acting for Reed Elsevier and no one else in connection with the transaction and will not be responsible to anyone other than Reed Elsevier for providing the protection afforded to customers of Morgan Stanley Dean Witter, nor for providing advice in relation to the transaction. The contents of this announcement, which have been prepared by and are the sole responsibility of the directors of Reed Elsevier, have been approved by Morgan Stanley Dean Witter solely for the purposes of section 57 of the Financial Services Act 1986. Morgan Stanley Dean Witter does not make any representation or warranty express or implied and it should not be assumed that the information contained in this presentation will remain unchanged after the date hereof nor that any update will be prepared. Information herein has been provided by Reed Elsevier and has not been independently verified by Morgan Stanley Dean Witter, which does not accept responsibility for its accuracy or completeness or conformity with information in its possession. These materials are neither an offer to purchase nor a solicitation of an offer to sell shares of Harcourt General Inc. At the time Reed Elsevier commences this offer, it will file a tender offer statement and Harcourt General Inc will file a solicitation/recommendation statement with the US Securities and Exchange Commission. The tender offer statement (including an offer to purchase, a related letter of transmittal and other offer documents) and the solicitation/recommendation statement will contain important information which should be read carefully before any decision is made with respect to the offer. These materials do not constitute an offer of securities for sale in the United States or any other jurisdiction. Securities may not be offered or sold in the United States absent registration or an exemption from registration under the US Securities Act of 1933, as amended. The distribution of these materials in, into or from any jurisdiction other than the United Kingdom and the United States may be affect by the laws of the relevant jurisdiction. Persons outside those jurisdictions should inform themselves about and observe all applicable requirements. These materials should be read in conjunction with the full text of the press release dated 27 October 2000. This presentation contains forward-looking statements within the meaning of Section 27A of the US Securities Act of 1933, as amended, and Section 21E of the US Securities Exchange Act of 1934, as amended. These statements concern future matters, such as the features and functions of, and markets for, products and services offered by Reed Elsevier and their business plans and strategies. These forward-looking statements also include statements concerning the advantages of the proposed transaction; the products and services to be offered by Reed Elsevier; the benefits of the transaction with regard to leveraging the client bases of the respective companies and anticipated cost savings; and other statements regarding matters that are not historical. Forward-looking statements are based on the current expectations of the management of Reed Elsevier and are subject to risks and uncertainties. Actual results might differ materially from the results discussed in the forward-looking statements. For example, there can be no assurance that any of the expected advantages of the transaction will be realised. Factors that could cause or contribute to differences in results include risks associated with integration of the operations of Reed Elsevier and the acquired assets of Harcourt General Inc; the effect on Reed Elsevier of the failure to realise synergies or other anticipated benefits of the transaction; price and currency fluctuations; the impact of electronic or other distribution formats; legislative, fiscal and regulatory developments and political risks, general conditions in the businesses, actions of competitors and general economic conditions. Reed Elsevier is not under any obligation (and expressly disclaims any such obligation) to update or alter its forward looking statements whether as a result of new information, future events or otherwise. Transaction Overview Crispin Davis SUMMARY OF TRANSACTION o Reed Elsevier to acquire Harcourt General Inc - retain STM and K-12 Education and Testing - on-sell Higher Education and Corporate and Professional Services o Harcourt STM - excellent fit with Elsevier Science - global leadership in Medical o Harcourt K-12 Education and Testing - excellent position in US schools - leading position in schools education in English speaking world o Accelerated revenue and profit growth outlook TRANSACTION HIGHLIGHTS o Acquisition price of $59 per share o Total consideration $4.45 billion; net debt of $1.2 billion o Agreed back-to-back on-sale of assets to The Thomson Corporation for $2.06 billion o STM and Educational implied value of $4.5 billion o Accretive to adjusted earnings per share in 2001 o RoI projected to exceed Reed Elsevier WACC within 5 years A UNIQUE OPPORTUNITY FOR REED ELSEVIER o Expansion earlier than anticipated but Reed Elsevier has the vision and resources o Real progress in execution of strategy o Step change made in management effectiveness o Creates higher quality portfolio o Accelerates revenue and profit growth HIGHER QUALITY PORTFOLIO Reed Elsevier Proforma Revenue STM 19 STM 24 Legal 33 Legal 25 Education 5 Education 18 Business 43 Business 33 Adjusted STM 29 STM 32 operating Legal 36 Legal 28 profit Education 4 Education 16 Business 31 Business 24 Reed Elsevier -Year to 31 December 1999 Harcourt STM and Education and Testing - LTM to 31 July 2000 (unaudited) HARCOURT STM o Highest quality Science and Technical assets (Academic Press) - excellent fit with Elsevier Science - provides strong positioning across entire STM spectrum o Global leadership in Medical o Outstanding platforms for accelerated growth in Internet information solutions COMBINED STM PORTFOLIO ENHANCES GROWTH OPPORTUNITIES HARCOURT K-12 EDUCATION AND TESTING o Strongly attractive market growth dynamics o Very successful and growing market share o Senior management highly respected o Strong fit of publishing skills and expertise o Emerging Internet opportunities REED ELSEVIER AND HARCOURT ESTABLISHES LEADING POSITION IN SCHOOLS EDUCATION IN ENGLISH SPEAKING WORLD HARCOURT GENERAL LTM to 31 July 2000 Revenues Adjusted operating profit $m $m STM 664 164 Education and Testing 974 209 Higher Education 412 67 Corporate and Professional Services 317 5 ---- --- 2367 445 ==== === Notes: LTM to 31 July 2000 (unaudited) Segment analysis adjusted from reported figures to reallocate revenues to respective businesses - Harcourt Educational Measurement and The Psychological Corporation - Harcourt Publishing International Adjusted operating profit is stated before amortisation of goodwill/intangible assets and corporate HARCOURT STM: ACADEMIC PRESS (LTM revenues $169m) o 174 peer-reviewed journals, with high citation ranking o Key titles in life, physical, social and computer sciences o Major reference books and databases o IDEAL online platform (100,000 articles) o Market growth 5% Market position [GRAPHIC OMITTED] Elsevier Science 15% Wolters Kluwer 9% Springer/Bertelsmann 5% Wiley 4% Academic Press 4% Others 59% Size $4 billion Note: LTM to 31 July 2000 (unaudited) Source: SIMBA 1999 HARCOURT STM: HARCOURT HEALTH SCIENCES (LTM revenues $495m) o Global leadership in medical publishing o Leading clinical reference works, journals and handbooks o Key brands in primary medical research, clinical practice and allied health o Key imprints Mosby, Churchill Livingstone, Harcourt and WB Saunders o MD Consult online platform o Market growth 5-6% Market position [GRAPHIC OMITTED] Harcourt 33% Wolters Kluwer 23% Others 44% Size $2 billion Note: LTM to 31 July 2000 (unaudited) Source: SIMBA 1999 STM OPERATING PRIORITIES o Creation of two separate divisions within Elsevier Science: Science, Medical o Realise operational synergies between Academic Press and Elsevier Science o Expansion of ScienceDirect online platform o Focus Medical operations on key clinical disciplines and accelerate online solutions o Elsevier Science strategy and management team well positioned to take on integration and expansion HARCOURT EDUCATION AND TESTING (LTM revenues $974m) K-6 (elementary) Harcourt School Publishers - Market leader in Elementary 6-12 (secondary) Holt, Rinehart and Winston - Major position in Secondary Supplemental Steck-Vaughn - Major position combined with Rigby Trade Harcourt Trade - Niche trade publisher Testing Harcourt Educational Measurement - Market leader in education testing The Psychological Corporation - Major position in clinical testing Note: LTM to 31 July 2000 (unaudited) US K-12 EDUCATION MARKET o $4 billion K-12 market historically growing at 6% o Basal growth accelerating; Supplemental and Testing over 10% o Positive growth dynamics - rising enrolments - strong funding environment - favourable adoption calendar - progress towards technology enabled learning - growing focus on performance and accountability - supplemental material increasingly important K-12 BUSINESSES: HARCOURT SCHOOL PUBLISHERS (K-6) AND HOLT, RINEHART AND WINSTON (6-12) K-6 (LTM revenues $364m) o Leading positions in key disciplines - Science - Reading - Math - Social Studies o Adoption success in 2000 - - Reading Texas - - Science California Texas Florida o Industry leading new business capture rates; taking market share 6-12 (LTM revenues $229m) o Leading position - Literature - Language Arts o Strong growing position in Science o Investing in - Math o Adoption success in 2000 - Literature South Carolina - Science California o Opportunity for significant growth Note: LTM to 31 July 2000 (unaudited) K-12 STATE ADOPTION SCHEDULE Major Adoptions Scheduled for Largest States 2000 2001 2002 California Science Math Science Social Studies Reading Language Arts Florida Science Social Studies Reading Health Health Language Arts Texas Reading Reading Science Science Literature Literature Language Arts Source: Association of American Publishers, Industry Sources o Largest three states represent 25% of adoption market o Subject areas play to Harcourt's strengths - Reading, Literature, Science and Social Studies SUPPLEMENTAL: STECK-VAUGHN (LTM revenues $91m) o Increasingly significant part of overall educational offering o Existing high quality Reed Elsevier Rigby business growing at >25% o Combination with Steck-Vaughn will maximise opportunity in - K-3 literacy - English as second language - School library Note: LTM to 31 July 2000 (unaudited) K-12: ONLINE OPPORTUNITY o Schools market late adopter o Harcourt investments as companion services to core publishing programmes o Developing opportunities online - e-learning applications - online teacher support - online reference library - testing and test preparation o Accelerated investment built into plans TESTING: HARCOURT EDUCATIONAL MEASUREMENT AND THE PSYCHOLOGICAL CORPORATION (LTM revenues $238m) o US Educational testing is a $750 million market growing at over 10% per year o Increasing focus on educational standards and accountability o Harcourt Educational Measurement is market leader in test creation - industry leading Stanford and Metropolitan tests - core test programmes in 20 key states o Investing in online programmes and scoring o The Psychological Corporation - a leader in clinical testing Note: LTM to 31 July 2000 (unaudited) EDUCATION AND TESTING OPERATING PRIORITIES o Global Education Head to be appointed o US Education to be led by Harcourt's Anthony Lucki o Maintain momentum in state adoption success; follow through in open states o Integration of Steck-Vaughn and Rigby o Step up investment - secondary math programme - Steck-Vaughn front list - online publishing unit o Expand scope of Testing business through Internet services KEY CONCLUSIONS o Total commitment to strategy and successful execution o Rare opportunity to acquire high quality assets in attractive markets at acceptable price - significant boost for Science publishing - unique Medical portfolio - major position in fast growing US Education o Higher quality overall portfolio ACCELERATED REVENUE AND PROFIT GROWTH Financial Summary Mark Armour HARCOURT GENERAL LTM to 31 July 2000 Revenues Adjusted profit $m $m STM 664 164 Education and Testing 974 209 Higher Education 412 67 Corporate and Professional Services 317 5 ---- ---- 2367 445 Corporate expenses ==== (22) Net interest expense (80) ---- Profit before taxes 343 ==== Notes: LTM to 31 July 2000 (unaudited) Segment analysis adjusted from reported figures to reallocate revenues to respective businesses - Harcourt Educational Measurement and The Psychological Corporation - Harcourt Publishing International Adjusted profit is stated before amortisation of goodwill/intangible assets of $73 million HARCOURT STM: FINANCIAL PERFORMANCE $ million 1997 1998 1999 2000 (LTM) Revenues 400 466 633 664 Adjusted operating profit 97 105 138 164 Margin 24% 23% 22% 25% Notes: Year to 31 October; LTM to 31 July 2000 (unaudited) Segment analysis adjusted from reported figures to reallocate revenues to respective businesses - Harcourt Educational Measurement and The Psychological Corporation - Harcourt Publishing International Adjusted operating profit stated before amortisation of goodwill/ intangible assets and corporate expenses HARCOURT STM: FINANCIAL PERFORMANCE o Revenue growth fuelled by acquisitions - Morgan Kaufman (August 1998) Academic Press - Churchill Livingstone (February 1998) HHS - Mosby (October 1998) HHS o Reorganisation of acquired businesses - rationalisation of publishing programme - integration of Medical businesses with Saunders o Investment in online platform o Strong organic growth in first 9 months 2000 - 7% revenue growth - 33% profit growth, including integration benefit HARCOURT EDUCATION AND TESTING: FINANCIAL PERFORMANCE $ million 1997 1998 1999 2000 (LTM) Revenues 621 751 787 974 Adjusted operating profit 116 147 159 209 Margin 19% 20% 20% 21% Notes: Year to 31 October; LTM to 31 July 2000 (unaudited) Segment analysis adjusted from reported figures to reallocate revenues to respective businesses - Harcourt Educational Measurement and The Psychological Corporation - Harcourt Publishing International Adjusted operating profit stated before amortisation of goodwill/ intangible assets and corporate expenses HARCOURT EDUCATION AND TESTING: FINANCIAL PERFORMANCE o Consistently strong performance by Harcourt School Publishers o Holt, Rinehart, Winston now performing well after weakness in 1998-1999 from adoption calendar and organisational issues o Steck-Vaughn acquired in June 1997; focus being re-established following management changes o Continual programme of new product investment o Strong consistent growth in Testing o Strong organic growth in first 9 months 2000 - 38% revenue growth - 68% profit growth SYNERGIES AND INVESTMENT ASSUMPTIONS STM o $40 million annual cost savings o $20 million annual additional investment Education & Testing o $5 million annual cost savings o $20 million annual additional investment Corporate o $25 million corporate expenses saved Restructuring o $100 million estimated exceptional costs pre-tax VALUATION SUMMARY o Cash tender offer at $59 per share values Harcourt at $4.45 billion - inherit debt of $1.2 billion (October est) - assumed corporate net liabilities of $0.3 billion o On-sale of Higher Educational and Corporate and Professional Services (excluding Testing) on debt free basis - pre-tax cash proceeds of $2.06 billion - tax leakage of $0.5 billion o Reorganisation and transaction costs $150 million o STM and Education businesses implied value of $4.5 billion VALUATION MULTIPLES STM & Education 2000 1999 (LTM) Multiples of: Revenue 2.8x 3.2x Adjusted operating profit 12.2x 15.3x EBITDA 11.6x 14.4x EBITDA* 8.8x 10.8x Notes: LTM to 31 July 2000 (unaudited) Segment analysis adjusted from reported figures to reallocate revenues to respective businesses - Harcourt Educational Measurement and The Psychological Corporation - Harcourt Publishing International Adjusted operating profit stated before amortisation of goodwill/ intangible assets and corporate expenses EBITDA* is stated after adding back amortisation of pre-publication costs PROFORMA FINANCIAL EFFECT LTM to 31 July 2000 ------------------- $m Adjusted operating profit STM 164 Education and Testing 209 --- 373 Acquisition financing (342) ---- Proforma incremental pre-tax profit 31 ==== Notes: LTM to 31 July 2000 (unaudited) Adjusted operating profit is stated before amortisation of goodwill/ intangible assets and corporate expenses Financing relates to $4.5 billion implied value of STM and Education businesses FINANCING o $6.5 billion of new bank facilities available - acquisition cost - refinancing of Harcourt debt - funding of net corporate liabilities - working capital o Facilities to be reduced: - from on-sale proceeds (net) of $1.5 billion - potential assumption of Harcourt public debt of $0.8 billion o Intention to refinance through term debt; new equity in the equalisation ratio of up to 10% of Reed International and Elsevier to be considered, subject to market conditions o Proforma EBITDA net interest cover in 2001of 3.6x and 4.4x in 2002 on 100% debt financed basis o Blended financing rate of approximately 7.6% PROFORMA BALANCE SHEET [pounds]m Reed Elsevier Harcourt Transaction Proforma and on-sale effects Goodwill/intangible assets 3873 935 1895 6703 Fixed assets 497 191 (133) 555 Working capital & other net liabilities (810) 298 (42) (554) ---- --- --- ---- 3560 1424 1720 6704 ==== ==== ==== ==== Shareholders' funds 1970 506 (506) 1970 Provisions and minorities 115 - - 115 Net debt 1475 918 2226 4619 ---- --- ---- ---- Capital employed 3560 1424 1720 6704 ==== ==== ==== ====
Reed Elsevier - As at 30 June 2000 Harcourt - As at 31 July 2000 TENDER OFFER PROCESS o Tender offer launched within one week - recommended by Harcourt Board - Smith family have pledged their 28% interest - break up fee of $180 million if agreement terminated by Harcourt o Closing conditional on - satisfactory acceptances - regulatory approval o Back-to-back on-sale agreement with Thomson o Completion of transactions expected Q1 2001 -----END PRIVACY-ENHANCED MESSAGE-----