Maxwell Sues Harcourt to Block Recapitalization

Publisher Robert Maxwell on Monday sued Harcourt Brace Jovanovich Inc. to halt a $3-billion recapitalization plan aimed at blocking Maxwell’s attempt to take over the publisher, and indicated he might renew the bid.

Maxwell told a news conference that he was seeking U.S. government permission to continue increasing his stake in Harcourt, which amounts to less than 2% of the company’s 39.4 million common shares outstanding.

Maxwell said he had sufficient resources to launch a new offer for Harcourt if his suit was successful, but he said he would drop his bid if the suit failed.

The lawsuit filed in U.S. District Court in New York was intended to block the recapitalization plan Harcourt unveiled last week in response to an unsolicited $1.73-billion bid from Maxwell’s British Printing & Communication Corp. PLC.

British Printing withdrew the offer Thursday after Harcourt proposed the recapitalization.

Harcourt would have to borrow $3 billion to finance the plan, under which it would pay shareholders a cash dividend of $40 a share plus a fraction of a share of a newly issued preferred stock intended to have a market value of $10 apiece.

Harcourt shares traded at $54.75 on Monday on the New York Stock Exchange, down 50 cents from Friday’s close.

Maxwell’s lawsuit seeks to prevent the payment of the special dividend and to prevent Harcourt from issuing 40,000 shares of super voting preference stock to First Boston Securities Corp., its financial adviser. First Boston also was named as a defendant.

As part of its defensive plan, Harcourt also bought back 4.8 million, or 12.2%, of its common shares last week. At Friday’s closing price, the stock buyback would have cost $265.2 million.

Harcourt said the stock buyback and its other moves would place more than 40% of its voting stock in friendly hands.

Spokesmen at Harcourt’s Orlando, Fla., headquarters did not immediately return telephone calls seeking comment.

Maxwell told the London news conference that the recapitalization plan illegally blocked his bid by “saddling the corporation with $3 billion in debt and effectively, in my mind, hijacking HBJ for the benefit of its management.”

He also criticized Harcourt for failing to negotiate with him and called his offer “of considerable economic value to all HBJ shareholders.”