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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
Date of Report (April 13, 2000)(April 14, 2000)
SCHOLASTIC CORPORATION
(Exact name of registrant as specified in its charter)
0-19860
Commission File Number
DELAWARE 13-3385513
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
555 BROADWAY, NEW YORK, NEW YORK 10012
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 343-6100
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SCHOLASTIC CORPORATION
CURRENT REPORT ON FORM 8-K, DATED APRIL 14, 2000
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ITEM 5. OTHER EVENTS
See Exhibit 99.1 noticing that on April 13, 2000 Scholastic Corporation entered
into a definitive agreement with Lagardere S.C.A. of France to acquire Grolier,
Inc. for $400 million in cash.
ITEM 7. EXHIBITS
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Exhibit
NUMBER DESCRIPTION OF DOCUMENT
<S> <C>
99.1 Press release of Scholastic Corporation, dated April 13, 2000.
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SCHOLASTIC CORPORATION
CURRENT REPORT ON FORM 8-K, DATED APRIL 14, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
SCHOLASTIC CORPORATION
(Registrant)
Date: April 14, 2000 /S/ RICHARD ROBINSON
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Richard Robinson
Chairman, Chief Executive Officer &
President
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CURRENT REPORT ON FORM 8-K, DATED APRIL 14, 2000
EXHIBIT INDEX
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EXHIBIT NUMBER DESCRIPTION OF DOCUMENT PAGE NUMBER IN SEQUENTIALLY
NUMBERED COPY
<S> <C> <C>
Exhibit 99.1 Press release of E-1
Scholastic Corporation, dated
April 13, 2000.
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EXHIBIT 99.1
CONTACT: Media: Judy Corman 212-343-6833
Investors: Ray Marchuk 212-343-6741
SCHOLASTIC TO ACQUIRE GROLIER FOR $400 MILLION
STRATEGIC TRANSACTION WILL GREATLY EXPAND SCHOLASTIC'S DIRECT-TO-HOME BUSINESS,
GROW SCHOOL LIBRARY BUSINESS AND BROADEN INTERNATIONAL REACH
ACQUISITION EXPECTED TO INCREASE SCHOLASTIC'S OPERATING INCOME APPROXIMATELY
30%
GROLIER'S CUSTOMER BASE OF 3 MILLION PARENTS OF CHILDREN UNDER 6, EXTENSIVE
CONTENT, AND DIRECT MARKETING AND TECHNOLOGY SKILLS WILL ACCELERATE DEVELOPMENT
OF SCHOLASTIC.COM
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NEW YORK, APRIL 13, 2000 -Scholastic (NASDAQ: SCHL), the global children's
publishing and media company, announced today that it has entered into a
definitive agreement with Lagardere S.C.A. of France to acquire Grolier Inc. for
$400 million in cash.
Grolier, with 1999 revenues of approximately $450 million and earnings
before interest, taxes, depreciation and amortization of approximately $45
million, has three principal areas of operation - the leading U.S. direct
mail-to-home and e-commerce book clubs for children through age 5, the leading
on-line and print publisher of children's reference products (including major
encyclopedias) sold primarily to U.S. school libraries, and significant
international operations in the United Kingdom, Canada and Southeast Asia.
Grolier also publishes trade books under the Orchard Books, Children's Press and
Franklin Watts imprints, sold both to libraries and the trade.
"The strategic growth opportunity provided by this acquisition will
simultaneously enhance Scholastic's presence in home book clubs, school
libraries and in Asia, while giving us a large new customer base for our
developing Internet products and services," said Richard Robinson, Scholastic's
Chairman, President and CEO. "Grolier's direct-to-the-home business provides
access to millions of parents of children under age 6 who Scholastic can
transition to Scholastic's 6-12 products as they mature. Acquiring Grolier
brings financial benefits as well as strategic benefits, including major
efficiencies through cost reduction opportunities. The acquisition of Grolier
will increase Scholastic's projected operating income by approximately 30%, and
will be neutral to earnings per share in fiscal 2001 and accretive thereafter."
Acquiring Grolier will provide Scholastic with the following key benefits:
1. INCREASED SCALE: Scholastic will strengthen its position as the world
leader in publishing and distributing children's books - giving the Company
increased scale to enhance profitability.
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Upon closing, the combined operations would represent a $1.8 billion
business of which children's book publishing would be $1.5 billion and
include $350 million of direct-to-home sales in the U.S. The combined
direct-to-home sales operation creates a major new distribution channel to
complement Scholastic's established school-based book club and book fair
channels.
2. EXPANDED ACCESS TO SCHOOLS & LIBRARIES: Grolier's $80 million library
business will provide a greater presence, enabling Scholastic to sell more
effectively a wide variety of materials to libraries and to increase the
profitability of the Company's Educational Publishing business. As the
leading provider of children's books and reference material to school
libraries in the U.S., Grolier has more than 150 salespeople who can also
sell Scholastic materials to school libraries.
3. INTERNET STRATEGY: The addition of Grolier's $270 million
direct-to-the-home business will significantly advance Scholastic's
Internet strategy to provide educational materials and Internet-delivered
home-learning services purchased by parents at home to improve their
children's learning. By merging Grolier's customer database, which focuses
on children through age 5 and includes 3 million active parent customers,
with Scholastic's existing home continuity database, which focuses on
children in the 6-12 age bracket and includes 1 million parent customers,
the Company will have a major resource for home direct marketing through
the Internet as well as targeted mailings. The strong presence of Grolier
in school libraries, with $4.5 million in Internet revenues and millions
of student reference look-ups, will also strengthen Scholastic's
school-based Internet position. Grolier's and Scholastic's complementary
Internet presence in libraries and classrooms will also reinforce each
other's online marketing in schools.
4. GREATER INTERNATIONAL PRESENCE: Grolier's $100 million business, primarily
located in the UK, Canada and Asia, will enhance Scholastic's international
operations, especially in Southeast Asia, where Grolier has more than $30
million in reference sales. Scholastic's direct-to-the-home children's book
sales in the UK will be substantially expanded by Grolier's profitable $45
million business.
5. POSITIVE FINANCIAL IMPACT: Scholastic expects the acquisition to be neutral
to the Company's earnings in the 2001 fiscal year starting June 1, 2000,
accretive to earnings by approximately $0.15 to $0.20 per share in FY 2002,
and increasingly accretive thereafter. The Company expects to achieve
annual cost savings of approximately $20 million over two years, primarily
in order processing, fulfillment, manufacturing, distribution, and overhead
reduction. The Company also expects to increase revenues and profitability
by taking advantage of numerous cross-selling opportunities.
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Robinson continued, "In addition to providing another major sales channel
for our children's book distribution business, Grolier will improve the
profitability of our education business. It will strengthen our position in
U.S. school and public libraries - a growing $5.5 billion market where
Grolier has a strong print and online presence, including leading
encyclopedias such as ENCYCLOPEDIA AMERICANA, THE NEW BOOK OF KNOWLEDGE and
Spanish language encyclopedias."
Robinson added, "The combination of Scholastic's and Grolier's more than
four million family household accounts per year will provide exceptional
cross-selling opportunities, enabling us
to expand greatly the number of accounts we will serve through the
Internet. Grolier's database of parent customers, when merged with ours,
will provide a ready constituency when we launch our Scholastic.com home
learning services next year. Grolier's contemporary online reference
resources will also add to a content-rich e-commerce site, helping us
deliver a wide range of innovative learning solutions in school and at
home."
Arnaud Lagardere, on behalf of Lagardere S.C.A., stated, "We are glad that
Scholastic, a trusted publisher and distributor of children's books and
educational materials, will be able to carry on the Grolier business."
The transaction, which is subject to certain regulatory approvals, is
expected to close by early June 2000. Scholastic plans to finance the
acquisition initially through bank debt, under a committed facility, and
subsequently through a combination of debt and/or equity.
"We are looking forward to closing this transaction, integrating our
operations with Grolier's and working together to improve service to our
combined customers. We enthusiastically welcome Grolier's strong management and
talented employees into the Scholastic family," added Robinson.
Credit Suisse First Boston is acting as financial advisor to Scholastic on
this transaction and Deutsche Banc Alex. Brown is acting as financial advisor to
Lagardere North America, Inc.
Scholastic creates and distributes innovative and quality educational
materials for use in school -- children's books, textbooks, magazines,
technology and teacher materials -- and engaging and appropriate products for
use at home -- magazines, software, television programming, videos and toys.
Building long-term relationships with teachers, parents and children since 1920,
Scholastic is unique in its understanding of what kids want and need to read and
learn. Scholastic.com is a leading Internet education destination for K-8
teachers and kids, which attracts over l.5 million unique visitors a month. The
Company is the world leader in children's school book clubs and school book
fairs, through which children purchase books and software for their use at home.
Internationally, Scholastic operates wholly owned companies in Canada, the UK,
Australia, New Zealand, Mexico, Hong Kong, India and Argentina.
Scholastic's corporate information can be found at HTTP://WWW.SCHOLASTIC.COM.
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THIS NEWS RELEASE INCLUDES FORWARD-LOOKING STATEMENTS, WHICH ARE BASED ON THE
CORPORATION'S CURRENT EXPECTATIONS AND ASSUMPTIONS, AND ARE SUBJECT TO A NUMBER
OF RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO MATERIALLY DIFFER
FROM THOSE ANTICIPATED. SUCH RISKS AND UNCERTAINTIES ARE DISCLOSED IN COMPANY
FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
