Scholastic Corporation will be selling its EdTech business to Houghton Mifflin Harcourt Company for $575 million.
Scholastic’s educational technology that will be sold to HMH includes Math 180 for middle school students, iRead for grades K-2, System 44 Next Generation for students grades 3-12 who need reading help, Common Core Code X for the iPad that prepares students for ELA, and nextpert, which teaches educators how to instruct for the Common Core curriculum.
This will allow Scholastic to focus on its core businesses meant to streamline the company. It plans to reinvest the proceeds from the sale in children’s book publishing, classroom publishing, and international business. HMH, on the other hand, is looking to expand its “digital infrastructure and expertise” and branch out further into educational technology, quotes Digital Book World.
Scholastic will be keeping Storia, its elementary-level digital library, and Flix, a collection of literary and educational videos.
According to Market Watch, the management team and its 800 employees is expected to remain with the business under Houghton Mifflin Harcourt.
Richard Robinson, Scholastic’s Chairman, President, and CEO said:
The EdTech business has a substantially different model for product development, marketing, and sales from Scholastic’s core school-based and consumer print and digital publishing businesses. EdTech also requires longer lead times for selling and larger investments in product development. Accordingly, we believe it is in the best interest of the Company and its shareholders to accept this offer for the EdTech business. Scholastic plans to maintain its balanced approach to capital allocation, redeploying the proceeds from this transaction into strategic investments to accelerate profitable sales growth in our core children’s books and educational publishing businesses in the US and around the world, while continuing to return capital to shareholders over time.
Linda K. Zecher, HMH’s President and CEO, said:
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. We believe that by diversifying our education portfolio, we will be taking an important step toward optimizing our growth while enhancing our resiliency throughout economic and market cycles.
Tony Wan of EdSurge quotes Bianca Olson, HMH’s Senior Vice President of Corporate Affairs:
We’re excited about the complementary possibilities between Scholastic’s products and our products. HMH’s strength has been in the core K-12 market. [Scholastic's] tools are market leaders in the digital intervention space. [This deal] is going to fill a gap in our product portfolio and help us grow in complementary markets like intervention and early learning.
EdTech had $249 million in revenues and $40 million in operating income in the 2014 fiscal year. These events come after a call from Q Investments LP, a texas hedge fund, for HMH to return more profits to its shareholders, writes Jeffrey A. Trachtenberg of the Wall Street Journal. Investors approve of the deal.