Harcourt Snubs Maxwell; Plans Its Takeover Defense

NEW YORK — Directors of Harcourt Brace Jovanovich on Tuesday brushed aside a $2-billion takeover bid from British publisher Robert Maxwell and instead approved a $3-billion recapitalization of the firm that would include a special cash-and-stock dividend to shareholders, repurchase of up to 6 million of its shares and possible sale of assets.

The board of the big textbook publisher called Maxwell’s offer of $44 a share “inadequate,” and in a strongly worded statement Harcourt Chairman William Jovanovich said the British publisher is “unfit” to head the firm and “ought to be sent packing to Liechtenstein,” referring to the small European duchy where Maxwell’s Pergamon Holding Foundation is based.

Classic Defense

Analysts said the recapitalization plan proposed by Harcourt management is a classic anti-takeover defense. The board’s plan would increase Harcourt’s corporate debt to $2.9 billion from $837 million. The company said First Boston Securities has agreed to provide $985 million of the new financing. New York-based Morgan Stanley has agreed to act as lead bank in lending $1.9 billion more, it added.

First Boston Securities will also receive shares of a new issue of preferred stock that will give the securities firm a voting block equivalent to 8.2 million common shares. Harcourt now has 39.4 million common shares outstanding.

The repurchase of common shares will take place on the open market “from time to time,” the Orlando, Fla.-based company said.

On the New York Stock Exchange, Harcourt shares closed Tuesday at $44.875, up $1.50. The recapitalization plan was announced after the market closed.

Harcourt did not say which assets it may sell as a result of the restructuring. It called any sale a part of a planned reduction in expenditures. In addition to its book publishing operations, Harcourt owns the Sea World aquatic parks and an insurance business.

The special dividend would consist of $40 cash and a fraction of a share of new 12% preferred stock expected to have a market value on a fully distributed basis of about $10 per share, the company said. It will be paid July 31 to shareholders of record June 8.

Harcourt said it plans to call a special meeting of shareholders for late June or early July “to consider authorization of additional shares of common and preferred stock and to permit Harcourt to pay a dividend on preferred stock.”

Because of the planned special dividend, directors voted to omit payment of a regular quarterly dividend for the second quarter ending June 30.

Jovanovich’s vitriolic statement attacking Maxwell represented an escalation of the war of words between the two men that began after Maxwell made his surprise bid May 18.

Comment Recalled

The Harcourt chairman, who has become known for broadsides against business adversaries, cited a comment Maxwell made in 1983, when, accepting an honorary degree in the Soviet Union, he said the United States was using the Soviet downing of a Korean Air Lines jet “as a pretext for stepping up anti-Soviet propaganda.”

“What can be said? Mr. Maxwell has money, but not enough. He has ambition, but no standing,” Jovanovich said in his statement.

Maxwell, whose British Printing & Publishing Corp. has offered $2 billion for Harcourt, responded in a statement of his own that he was “extremely disappointed that to date Mr. Jovanovich has limited his comment to personal abuse of me.” He made no comment late Tuesday on the board’s rejection of his offer.