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

The management team of the EdTech business, including its President Margery Mayer, is expected to remain with the business as part of HMH. The business' approximate 800 employees are also expected to join HMH upon transaction close.

Financial Overview:
The acquisition is aligned with the Company's capital allocation framework and is expected to enhance HMH's financial profile.

Eric Shuman, HMH's Chief Financial Officer, said, "The highly-compelling strategic rationale coupled with opportunities for collaboration and coordination on the sales front makes this an attractive acquisition. In line with our capital allocation framework, we view this transaction as a prudent use of our strong cash position and balance sheet and believe that it will help enhance stockholder value over the long term."

For the fiscal year ended May 31, 2014, the EdTech segment of Scholastic delivered net sales of $249 million, up $21 million or 9% compared to fiscal 2013. In the same period, operating income grew $10 million or 34% from the prior year period to $40 million. Adjusted EBITDA and free cash flow for the EdTech segment were $68 million and $37 million respectively for the same period, up $16 million and $25 million respectively, from the same prior period.

In connection with this transaction, HMH expects to replace its existing $180 million term loan with a new $500 million committed term loan with a six year maturity.

Capital Allocation and Share Repurchase Program:
In addition, consistent with the Company's goal to create long-term stockholder value, HMH"s Board of Directors has authorized an additional $100 million under the Company's existing share repurchase program, bringing the total authorization to $200 million. This aligns with HMH's broader capital allocation strategy, which focuses on driving organic growth, pursuing strategic acquisition opportunities and returning capital to stockholders, when appropriate.