S.D. Software Firm Acquired by Competitor
Education Systems Corp., a fast-growing education software company based in San Diego, will be acquired for about $64 million in stock by Jostens Inc. of Minneapolis, according to a definitive agreement announced by the companies Tuesday.
A closely held company that has been selling computerized “teaching machines” for less than three years, Education Systems watched its sales grow to $22.4 million in 1988 from $300,000 in 1986, president John Kernan said Tuesday. Revenue growth will slow somewhat this year with 1989 revenues projected at about $30 million, he said.
Publicly held Jostens said it is the nation’s largest seller of class rings and yearbooks to high schools. The company also has a Phoenix-based education software unit called Prescription Learning that previously competed with Education Software but which now will be combined with it. Kernan will be chairman of the new business unit.
Education Systems sells computer software and hardware in networked systems that are used in learning laboratories in elementary schools. The systems are used for remedial and supplemental education and sell for about $100,000 each. Education Systems’ products are now in 800 schools, and Prescription Learning has installed systems in 2,500 schools nationwide.
Although Jostens has not decided on a name or a headquarters location for the new combined business, Kernan said no layoffs or relocations are planned for Education Systems’ 250 employees, 80% of whom are teachers or have graduate degrees. Relocations will be “minimal,” he said.
Jostens, which reported 1988 revenue of $560 million, will exchange 3.3 million of its shares for all outstanding shares of Education Systems, Jostens Chief Financial Officer Gerald Haugen said Tuesday. Using Jostens’ closing stock price of $19.50 Tuesday, the deal would be worth a total of $64.4 million. The deal should be complete by May, he said.
Education Systems stock is held by 150 of its employees and by a dozen venture capital firms, Kernan said. The two largest stockholders are Helix Investments of Toronto and BancBoston Ventures of Boston. Kernan, 43, who joined the company in September 1985, declined to disclose his stock holdings.
Saul Yaari, managing director of research at Piper Jaffray Hopwood investment bankers in Minneapolis, said the dilutive effects of the deal will knock 4 cents off his 1989 profit estimate of $1.42 a share for Jostens in 1989, Still, he described the acquisition as “positive” because it “increases the product offerings and marketing capabilities” of both companies.
Kernan, who was brought aboard to head Education Systems’s manegement by venture capitalists to help chart the company’s growth, said the merger with Jostens was approved because of the “attractive price” and the opportunity to join forces with a respected competitor.
