Reed Elsevier is pleased to announce today that it has entered into a definitive agreement to sell its Harcourt US Schools Education business to Houghton Mifflin Riverdeep Group for a consideration of $4.0 billion, with $3.7 billion payable in cash and $0.3 billion payable in common stock of Houghton Mifflin Riverdeep Group.

Reed Elsevier announced its intention to sell its Harcourt Education division in February this year in order to sharpen its strategic focus on the growing digital opportunities in its Scientific & Medical, Legal and Business divisions.  The sale of Harcourt Education will help create a more focused and cohesive business, well placed to deliver consistent adjusted earnings per share growth of a minimum of 10% annually at constant currencies. 

The Harcourt Education division was largely acquired by Reed Elsevier in July 2001 as part of its acquisition of Harcourt General Inc which also brought Reed Elsevier a strong science journals business and a leading position in the growing health sciences market.  The education businesses accounted for $2.1 billion of the consideration paid for Harcourt General Inc.

The Harcourt Education division reported 2006 total revenues of $1,637 million and adjusted operating profits, before the amortisation of acquired intangible assets, of $238 million, of which the Harcourt US Schools Education business contributed $1,113 million and $228 million respectively.  The capital employed of the Harcourt Education division as at 31 December 2006 was $2,580 million, including goodwill and intangible assets, of which the US Schools Education business was $1,978 million, with gross assets of $2,174 million.

The aggregate net proceeds of the sale of the Harcourt Education division, after taxes and other separation and transaction costs, are estimated to be approximately $4.0 billion.  It is intended to return the net proceeds to Reed Elsevier shareholders, following completion of the sale transactions expected in the first half of 2008, by way of special dividend followed by a corresponding consolidation of the outstanding share capital.

Commenting, Sir Crispin Davis, Chief Executive Officer of Reed Elsevier, said:

"We are pleased to announce the sale of the Harcourt US Schools business at a price that recognises the exceptional quality of the Harcourt assets and of its management and staff.

"Following the sale, Reed Elsevier will be a sharper and more focused company.  With our leading brands and authoritative content, we are well positioned to maximise the digital opportunities in our chosen markets."

UBS Investment Bank has acted as financial advisor to Reed Elsevier on the sale of the Harcourt Education division.