Harcourt Boosts Its Offer for NEC to $21 Per Share

IRVINE — Tipping the scale significantly in the contest to acquire National Education Corp., publisher Harcourt General Inc. on Thursday said it sweetened its bid to $21 a share, or about $797 million.

Last month, Harcourt offered $19.50 a share for the world’s largest provider of correspondence courses, or $740 million. The unsolicited bid topped the all-stock deal, now worth about $688 million, that National Education agreed to in March with Sylvan Learnings Systems Inc.

The new offer is “a significant step toward a friendly transaction,” said Harcourt spokesman Peter Farwell.

“I think Harcourt has carried the day,” said analyst Stephen D. Weinress at L.H. Friend Weinress in Los Angeles. “I don’t think Sylvan can match it.”

Analyst Michael T. Moe at Montgomery Securities in San Francisco said $21 is “a strong offer,” although it could go slightly higher. But he doubted that Sylvan would even make a counter bid. “If Harcourt hasn’t won, I think it can see the finish line from where it’s at,” he said.

National Education had little comment, other than saying it had rejected Harcourt’s earlier offer and that it would permit the publisher to conduct a review of its finances next week. It said there was “no assurance that the discussion with Harcourt would lead to an acceptable transaction.”

In New York Stock Exchange trading Thursday, NEC’s stock rose 25 cents a share to close at $20.50, while Harcourt fell 50 cents to $45.75. Sylvan’s stock closed Thursday at $31.25 a share, up $1.125 in Nasdaq trading.

Sylvan gave a brief response to Harcourt’s latest offer. “We intend to proceed as planned,” said Sylvan spokeswoman Vickie Glazar.

Harcourt has long been interested in acquiring NEC, but held back because of the Orange County company’s losses in earlier years. NEC has since undergone a financial turnaround under new management. The Sylvan deal apparently renewed Harcourt’s interest.

Based in Chestnut Hill, Mass., Harcourt has revenue of more than $3 billion a year. It owns the Harcourt Brace book publishing house as well as majority interests in the upscale Neiman Marcus and Bergdorf Goodman retail chains. It is also a major supplier of school textbooks, which it believes could be sold to customers of NEC’s correspondence courses.

Sylvan, based in Baltimore, has 650 tutoring centers nationwide for students in kindergarten through 12th grade. It views NEC as a strategic partner that would provide content for its educational programs.

Both proposed combinations are attractive strategically, said analyst Weinress. But from a purely financial standpoint, Harcourt’s bid is now so far superior to Sylvan’s that there’s little doubt about the outcome, he said.

Harcourt’s determination to prevail is all the more evident, Weinress noted, considering that the publisher will also be assuming some NEC debt and has agreed to pay the $30 million “break-up fee” that will be owed to Sylvan if its deal with National Education is canceled.