================================================================================
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. |_|
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<PAGE>
REED ELSEVIER
ACQUISITION OF HARCOURT GENERAL INC
30 October 2000
<PAGE>
AGENDA
o Transaction Overview Crispin Davis
o Financial Summary Mark Armour
o Q&A Crispin Davis
Mark Armour
Derk Haank CEO, Science
<PAGE>
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.
<PAGE>
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.
<PAGE>
Transaction Overview
Crispin Davis
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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)
<PAGE>
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
<PAGE>
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)
<PAGE>
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
<PAGE>
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)
<PAGE>
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
<PAGE>
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)
<PAGE>
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
<PAGE>
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
<PAGE>
Financial Summary
Mark Armour
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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%
<PAGE>
PROFORMA BALANCE SHEET
<TABLE>
[pounds]m Reed Elsevier Harcourt Transaction Proforma
and on-sale effects
<S> <C> <C> <C> <C>
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
==== ==== ==== ====
</TABLE>
Reed Elsevier - As at 30 June 2000 Harcourt - As at 31 July 2000
<PAGE>
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
