GCC To Hit The Books With Harcourt

Sitting on a $1.6 billion cash hoard, General Cinema Corp. agreed Jan. 24 to buy debt-laden publishing and insurance company Harcourt Brace Jovanovich in a deal valued at more than $1.4 billion.

Sources close to the companies said it is a good match for the theater chain, since textbook publishing is a steady business that generates healthy revenues not subject to the ups and downs of consumer marketing.

While analysts and insiders say the buyout is the best hope for Harcourt, the sale hangs on approval of Harcourt’s bondholders, who carry $1.9 million of its longterm debt.

Insiders say General Cinema has to offer the bondholders some sort of an attractive package that would swap new low-interest notes or shares for the debt.

Under proposed terms of the deal, Harcourt common shareholders and holders of its preferred stock will receive $1.30 a share. The company has 73 million outstanding common shares and 61 million preferred shares.

Many insiders believe Harcourt bondholders may not want to sell their bonds at discount.

Interest payments due on the debt are scheduled to rise sharply next year. Harcourt has been exploring alternatives for months, including looking for a potential buyer.

It amassed enormous debt through a recapitalization to thwart a hostile takeover by Britain’s Robert Maxwell.

As for General Cinema, the Massachusetts-based operator of one of the largest theater chains in the country said it had been looking for a new operating business for some time.

It had identified publishing as a potentially attractive expansion area because of its “steady growth,” per company spokesman Peter Farwell.

General Cinema will fund the transaction out of its $1.6 billion cash balance, a stockpile it acquired after selling its soft drink bottling business to PepsiCo. Inc. in March 1989 and its investment in Cadbury Schweppes PLC in October 1990.

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