Houghton Mifflin Harcourt (Nasdaq: HMHC) has agreed to acquire Scholastic Corp.’s (Nasdaq: SCHL) educational services and technology business for $575 million.
The transaction adds digital intervention content and services to Houghton's portfolio, positioning the company to bring academic intervention programs to a greater amount of underperforming students across the U.S.
The unit, which Scholastic has dubbed EdTech, generated $249 million in revenues and $40 million in operating income in the fiscal year ending May 31, 2014. According to New York-based Scholastic, revenues for EdTech are expected to be $175 million for the first nine months of the current fiscal year, which ends May 31.
Scholastic plans to use proceeds from the sale, estimated to be around $370 million, to grow the company's other business segments, including Children's Book Publishing and Distribution, as well as Classroom and Supplemental Materials Publishing.
Houghton Mifflin Harcourt had reportedly been in deal talks over the past few weeks, and analysts had anticipated the company would announce an agreement with either Scholastic or Kaplan Inc., a Fort Lauderdale, Florida, education company.
The education space, as a whole, has been attracting dealmaker attention for a while. The EdTech deal was announced just days after private equity firm Nautic Partners agreed to buy Source4Teachers, a Cherry Hill, New Jersey, provider of outsourced substitute teacher services to K-12 schools in the eastern U.S. Also in April, Sterling Partners closed a $200 million education-focused fund.