Two competing Internet services in the K-12 education market are joining forces in a new company to establish a K-12 portal and leverage their combined strengths in providing research tools for the education community. Bell & Howell Company announced that it has separated its K-12 Internet business from its Information and Learning division (formerly UMI), and is forming a new company that will be joined by the Electric Library school and library business of Infonautics, Inc.
Infonautics will own 27 percent of the new company and Bell & Howell (B&H) will own the balance. The transaction is expected to close during the third quarter of 1999, subject to regulatory approval and the approval of Infonautics' shareholders. Van Morris, CEO and president of Infonautics, will also be CEO of the new company, which has had an internal project name of "EdCo." Jim Roemer, chairman and CEO of B&H, will serve as the new company's chairman of the board. The board will have eight directors, six designated by B&H and two by Infonautics. Morris will be naming a transition team within the next week or so.
During simultaneous and separate conference calls held with investors and the press on July 9 concerning the announcement, both Roemer and Morris stressed the substantial synergies, strong assets, and complementary products that "EdCo" will have. Electric Library was called an "ease of use winner" with many desirable education features, such as maps, while ProQuest was commended for its broad and deep content, with only a little overlap in content between the two services. For the K-12 market, the two systems will be tied together seamlessly, though no details were given on what this might actually mean for users.
Both executives stressed the creation of a community that would connect teachers, schools, students, and parents in a safe environment, in particular, offering assurances to parents of a safe place for students to do research. Both looked at the new entity as a platform for future development and promised aggressive growth. The new company is expected to be a self-funded operation, but would likely seek additional public and private funds to support growth. Roemer indicated that there would be future announcements of other alliances and acquisitions, and that they envisioned other revenue possibilities for "EdCo," including e-commerce and advertising.
"The creation of a pure K-12 Internet company and the combination of Bell & Howell and Electric Library creates a strong new company focused on the education market," announced Roemer. "Taken together, ProQuest from Bell & Howell and Electric Library are present in almost 40,000 schools across the country and reach approximately 25 million students on a daily basis with unparalleled depth and breadth of content and research tools. Importantly, our customers, in addition to the continuation of both the ProQuest and Electric Library services, can expect us to develop new and innovative products and services as a result of this combination."
"Our vision is to leverage the strong position we have in the K-12 school environment into a much broader and deeper community of students, teachers, administrators, and parents. In fact, it is our view that the time is right to establish a K-12 portal on the Internet that not only provides research tools that deliver comprehensive and quick answers but also integrates the needs of the entire education community on both a national and local basis," Roemer continued.
Morris stated that the new company would be "a new entity with greater revenues, stronger capabilities and more significant reach into the educational community. We're immensely proud of what we achieved in the school market. In just two and a half years we grew that business from a standing start to a licensed base of more than 15,000 schools and libraries. Now, by combining that business with Bell & Howell's, we will produce a powerful market leader that can be truly innovative in meeting the needs of an under-served school community."
The new company will be based in Wayne, Pennsylvania, the current headquarters of Infonautics. About 115 to 120 Infonautics employees and about 75 people from B&H Information and Learning will be on the "EdCo" staff. The company will continue to maintain a "significant operation" in Ann Arbor, Michigan, at the Information and Learning headquarters, and no significant employee relocations are envisioned.
One industry observer mused that Infonautics partnering with Bell & Howell is the mating of the mouse and the elephant, but Roemer noted that the K-12 portion of the business represented less than 10 percent of the revenue for B&H Information and Learning, with the higher education market providing the rest. He also noted that the separation made sense because the two communities called for different marketing strategies.
Joe Reynolds, president and CEO of the Information and Learning division, said, "We think there are similar opportunities to create substantial value in the higher education market … We are already serving over half of the colleges and universities in North America through ProQuest and are rapidly expanding our suite of products and services to meet the needs of educators and learners throughout the world, whether in virtual or campus settings."
As part of the agreement, Bell & Howell will also pay Infonautics $22 million in cash and assume ownership of Infonautics' online archive business, including all existing contracts. (See the Feb. 22, 1999 NewsBreak about the announcement of its "next-generation e-commerce online archive technology.") The archive business will become part of the B&H Information and Learning division. Roemer noted that it would complement their existing business.
The infusion of cash will give Infonautics the boost it needs to grow its remaining Internet businesses. Following the transaction, Infonautics will continue to develop and market its suite of Sleuth services and will retain rights to market Electric Library to consumers. Earlier this year, Infonautics reduced operating expenses by cutting 10 percent of its workforce, consolidating development and technical operations, and narrowing its marketing focus. At that time, Infonautics also announced that it had retained Allen & Company Inc., a New York investment bank, "to act as its financial advisor to explore strategic alternatives for the Company." While showing impressive revenue gains, Infonautics reported a net loss for 1998 of $17.4 million. By converting value into cash and providing development capital, the deal should prove very attractive for the company's shareholders, who also stand to gain in the future success of "EdCo."
Infonautics launched its first Sleuth service, Company Sleuth, late last year. According to the company, more than 200,000 people have registered for the free business information service. In May the company launched Job Sleuth, a free service that searches the Internet's top job sites and databases for opportunities that match its users' profiles. The company has announced that it plans to launch its next Sleuth service, Sports Sleuth, later this quarter. Morris mentioned the possibility of building premium content on top of what is freely available on Sleuth.
Morris said that Infonautics would be recruiting additional top talent to build and promote the Sleuth service—possibly 20 to 25 people. He indicated there were plans for "a dozen or more Sleuths," with integration into personal portals. "We see a huge opportunity to be the King of Personalization," he said. Morris admits he has a lot of work ahead of him, driving the development of two Internet companies, but he sees them both as exciting opportunities with great potential.
For more information about Bell and Howell Information and Learning, call 800/521-0600, or visit their site http://www.bellhowell.infolearning.com. Additional information on Bell & Howell can be found at http://www.bellhowell.com.
Infonautics Inc. was founded in 1992, and is based in Wayne, Pennsylvania. Company sites include the following: