Scholastic to Acquire Grolier for $400 Million

Posted on April 14, 2000

Scholastic, a children's publishing and media company, has announced that it has entered into a definitive agreement with Lagardere S.C.A. of France to acquire Grolier Inc. for $400 million in cash. According to the company, the acquisition will help Scholastic strengthen its position in children's books, expand access to schools and libraries, broaden its international presence and help with its internet strategy.

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 - U.S. direct mail-to-home and e-commerce book clubs for children through age 5, the on-line and print publisher of children's reference products (including encyclopedias) sold primarily to U.S. school libraries, and 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.''

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. 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.