Houghton Mifflin Harcourt to Acquire Scholastic’s Educational Technology and Services Business for $575 Million

BOSTON - Global learning company Houghton Mifflin Harcourt (NASDAQ: HMHC) (HMH) announced today that it has entered into a definitive agreement to acquire the Educational Technology and Services ("EdTech") business of Scholastic Corporation for $575 million in cash, subject to customary working capital adjustments.

The acquisition would provide HMH with a leading position in intervention curriculum and services and extend its product offerings in key growth areas, including educational technology, early learning, and education services, creating a more comprehensive offering for students, teachers and schools. The transaction is expected to be accretive to HMH net income and free cash flow in 2016 and to yield synergies in 2016 and beyond with annual cost savings of $10 to $20 million. The transaction is expected to close in the second calendar quarter of 2015, subject to closing conditions and regulatory approval.

The transaction would provide added digital infrastructure and expertise to support the continued development of next-generation products for HMH's pre-K-12 and consumer businesses. In addition, HMH believes that combining EdTech's digital intervention solutions sales expertise with HMH's already strong sales organization will create new opportunities and accelerate the Company's growth.

"As HMH drives a learning transformation powered by technology, we believe the EdTech segment of Scholastic will strengthen our offering in both K-12 and other key growth areas, including digital intervention, early learning, consumer and professional development," commented Linda K. Zecher, HMH's President and Chief Executive Officer. "We believe that by diversifying our education portfolio, we will be taking an important step toward optimizing our growth while also enhancing our resiliency throughout economic and market cycles."

The EdTech segment of Scholastic provides digital intervention curriculum, products and services to schools and districts throughout the United States as well as related implementation and assessment services and school consulting services. The business consists of proven-effective intervention solutions, including READ 180®, the largest individual digital curriculum program in the marketplace, and MATH 180®, which is fast becoming a market leader since its introduction in 2014. HMH expects this transaction would enable the company to more comprehensively address upcoming K-12 adoptions and the needs of students in those markets who would benefit from an intervention solution.