Harcourt Brace Rebuffs Briton’s $2-Billion Offer : Analysts See Possibility of Takeover Battle Between U.S. Textbook Publisher and Media Magnate

British media magnate Robert Maxwell was rebuffed Monday in a surprise, $2-billion offer for Harcourt Brace Jovanovich, the largest U.S. elementary and high school textbook publisher and one of the last independent U.S. book publishing houses.

But analysts said the rejection may mark just the opening skirmish of a protracted takeover battle between Maxwell, who heads a worldwide newspaper, book publishing and printing concern, and the diversified 68-year-old publishing concern. If the deal is completed, it would become by far the largest of a continuing string of mergers in the American publishing industry.

Maxwell said in a letter to Harcourt Brace Chairman William Jovanovich that the $44-a-share deal would advance his British Printing & Communications Corp.’s goal of becoming one of the 10 largest global communications, information and entertainment firms. In a reply issued Monday afternoon, Jovanovich called the offer “preposterous, both as to intent and value.”

“I refuse to believe Mr. Maxwell can be allowed to preside over the largest education publisher in the United States. My parents sent me to school to become an American. That is a trust I have kept in 40 years of publishing for America’s schools,” said Jovanovich, who has himself become an industry legend since taking control of the company 17 years ago.

Despite those comments, Robert L. Pirie, chief executive of Rothschild Inc. and Maxwell’s investment banker, said Maxwell will continue to press his offer. “I think Mr. Jovanovich is simply stating his opinion; we will wait for the decision of the (Harcourt Brace board),” he said in an interview.

Harcourt’s stock soared to $46.625 a share in Monday trading on the New York Stock exchange, from Friday’s close of $29. Analysts said the closing price suggested that the stock market also believes that further bids may be forthcoming.

Harcourt Brace publishes textbooks for all educational levels, as well as scientific and general books, and has diversified into insurance and television stations. It also owns three Sea World marine parks, including one in San Diego.

The largest publishing industry merger to date was last year’s $520-million acquisition of Scott, Foresman by Time Inc.

Analysts said Maxwell has been aided in making his bid by the weakness of the U.S. dollar. “These Europeans are paying heavy currency for our cheap dollars,” said Ivan Obolensky, analyst with Sterling, Grace & Co., a New York investment bank. “You may see a lot more offers just like this for American publishers.”

Last September, he noted, Bertelsmann A. G., the West German publisher, agreed to pay $475 million for the Doubleday publishing operations.

The offer comes less than two months after Maxwell and Harcourt Brace bid against each other in an effort to acquire Harper & Row, the venerable New York publishing house that was ultimately purchased by Maxwell archrival Rupert Murdoch’s News Group for $300 million.

“Life is full of ironies,” said Brooks Thomas, who was replaced last week by Murdoch as chairman of Harper & Row. “It was Harcourt that put us into (takeover) play, and now it looks like somebody else is doing the same to them.”

J. Kendrick Noble, analyst with PaineWebber Inc. in New York, said the offer may become a long-running test of wills between Jovanovich and Maxwell, the Czechoslovakian-born enterpreneur who is known to love publicity and to relish takeover battles. “I’m expecting to see a fight, and the outcome is not certain,” Noble said.

Maxwell last year spent $275 million to buy two mid-sized U.S. printing concerns and also bid unsuccessfully for Scientific American magazine and Doubleday, as well as Harper & Row.

Reputation Questioned

The publisher, who in recent months has said publicly that he wants more American acquisitions, probably has the financing to raise his bid, according to Noble. But the analyst said he expects that Jovanovich may try to persuade the Harcourt board to refuse even offers that many shareholders would favor--and may also bring up issues of Maxwell’s reputation.

Maxwell, who owns the Daily Mirror and other British newspapers, is said to have a poor reputation in London’s financial community because of some past financial dealings.

In 1969, for example, Maxwell merged his Pergamon Press with a company controlled by American financier Saul Steinberg. But Steinberg later withdrew after contending he found irregularities in Pergamon’s books.

Analysts said Harcourt Brace’s elementary and high school textbook publishing business probably holds the greatest appeal for Maxwell. Demand for such books is expected to increase in the coming five years as the baby boom “echo”--children of the baby boom generation--reach school age.

Bought Marineland

The number of children in kindergarten through eighth grades, for example, is expected to rise to 34.1 million in 1992 from 30.6 million in 1986, said Robert A. Dunlap Jr., analyst with the Brown Bros., Harriman investment firm in New York. He said the renewed emphasis on “quality” education may prompt many school districts to replace their current textbooks.

Harcourt last year earned $75 million on sales of $967 million. The company last December purchased Marineland, the aging aquatic park on the Palos Verdes Peninsula, then announced in February that it would close the facility because it didn’t want to spend $25 million in needed improvements. The company said last week that it had sold the property to a developer.

Recent publishing industry mergers have also included International Thomson’s $270-million purchase of South-Western Publishing, and Harcourt’s $500-million purchase of the CBS Inc. book publishing unit.

The merger wave has been come about in part because many of the largest publishers have built up large cash reserves during the long economic recovery, according to analyst Noble. The expected boom in textbook demand is another factor, he said, as is the fall in the value of the dollar, which has increased the ability of foreign publishers to bid for U.S. concerns.

HARCOURT BRACE JOVANOVICH AT A GLANCE Known primarily as a publisher of textbooks, general and professional books, and magazines, the company also owns the Sea World parks and sells accident and health insurance. Publishing represents more than 50% of its revenue and profits.

Year ended Dec. 31: (in millions) 1986 1985 1984 Revenue $1,300.0 $990.5 $712.5 Net income 70.5 50.6 34.5

Assets: $363.6 million

Employees: 10,750

Shares outstanding: 39.4 million

52-week price range: $26.25 - $42.625

Monday’s close (NYSE): $42.625