2 GW Divisions Acquired by National Educational
National Education Corp. of Newport Beach said it reached preliminary agreement Wednesday with Gulf+Western Industries Inc. to purchase two GW training program units, Deltak and Resource Systems International, for $100 million.
The transaction, once approved by the boards of both companies, should secure NEC’s position as the nation’s largest provider of industrial and vocational training programs, said Jeffrey Brill, NEC vice president and general counsel.
He said the acquisition also is subject to review by the U.S. Department of Justice or the Federal Trade Commission for possible antitrust implications, although that review may be waived by the government. “We don’t expect any problems,” he said. “A lot of other companies are in the training field.”
Deltak, a Naperville, Ill., company that had $69 million in revenues last year, is a leading training center for data processors for the banking and financial services industries. Resource Systems, a Nashville, Tenn., firm that had $6 million in revenues last year, produces custom-designed, performance-based training materials for the utility and industrial sectors.
Brill said NEC had been following Deltak “for a number of years” as a possible compatible acquisition and that actual negotiations took place quickly.
Industry analysts agreed with Brill and executives at New York-based Gulf+Western that the sale would be good for both companies. It would give NEC its long-sought entry into the white-collar training field and would rid GW of two divisions that did not fit into its overall mix of publishing and information services, they said.
NEC, with 42 training centers nationwide and $183.1 million in revenues last year, plans to finance the acquisitions with bank loans and much of its $35 million cash on hand, Brill said. The new units are expected to add to NEC’s income this year, not dilute earnings as acquisitions often do, he said.
“NEC has a very strong balance sheet. They have no debt, so financing should be easy,” said Fred Anschel, a securities analyst with Dean Witter Reynolds Inc. in New York. “They should be able to pay off the debt within a few years just from cash flow.”
The sale would mark the eighth and ninth divestitures of GW units in the last year, with Deltak being the largest. Gulf has developed a strategic plan to rid itself of divisions that do not fit into its publishing operations, which are concentrated in general interest, education and business and professional information areas, said George Simpson, a vice president for GW’s Simon & Schuster Inc. publishing division.
“These divestitures are designed to give sharper focus to our publishing and information services operations,” said Martin S. Davis, GW chairman and chief executive. “The proceeds from their sale will be redeployed to other areas within publishing, most probably in education.”
Deltak aNd Resource Systems were units of Prentice-Hall, a book publishing firm GW acquired 15 months ago.