Nasco to Merge with Aristotle

The taxman, as well as a desire to grow an underdeveloped segment of its business, led $150 million educational supplies mailer Nasco International to merge with Aristotle Corp., a $10 million holding company. The deal is expected to close during the first quarter of 2002.

Because New Haven, CT-based Aristotle is a public company and the Fort Atkinson, WI-based Nasco is private, Aristotle will become the parent firm, with Aristotle CEO John Crawford maintaining his title. Steven Lapin, president/chief operating officer of Nasco’s Stamford, CT-based parent firm, Geneve Corp., will retain those roles in the combined company.

Aristotle owns Woodstock, NY-based Simulaids, which manufactures mannequins used for teaching healthcare professionals. In addition to Nasco, Geneve owns 58% of Independence Holding Co., a public insurance holding company that’s traded over the counter. Geneve already has a 51% interest in Aristotle, but once Nasco merges with the holding company, its income can be “sheltered with Aristotle’s significant tax loss,” Lapin says. “Nasco has to pay federal income tax for all its income. So by offsetting that against Aristotle’s losses, we can offset the tax burden on Nasco. And that’s good for Nasco, as well as for Aristotle’s shareholders.”

The merger also gives Nasco the opportunity to add more proprietary products to its health-education business, which the company aims to grow. Nasco’s primary focus is educational supplies for elementary, middle, and high schools; of Nasco’s 25 catalogs, just three serve the healthcare market. Simulaids’ mannequins and nursing-education simulation kits will help Nasco better merchandise those books, Lapin says.

The combined company plans to expand Nasco’s healthcare education business into Canada next year, as well as to acquire other manufacturers and distributors of educational products. In 2001, Nasco acquired Fort Collins, CO-based American Educational Products and Toronto-based Spectrum Educational Supplies — the latter of which gave Nasco entry into the Canadian market.

Under the merger agreement, Geneve will receive 15 million shares of Aristotle common stock and 10 million shares of a new $6 series J preferred stock, which will carry a 12% per annum dividend, in exchange for all of the Nasco common stock. Nasco will likely have $45 million of debt at closing. After the merger, Aristotle will have approximately 17 million common-share capitalization and 12 million preferred shares.