Pearson sells 22% stake in Penguin Random House to Bertelsmann for $1 bn

11 Jul 2017

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Education publisher Pearson, which is in the midst of a restructuring process, has agreed to sell its 22 per cent stake in Penguin Random House to Germany's Bertelsmann, to raise around $1bn (£776m),

The struggling publisher also offered to return £300m to shareholders through a share buyback after striking the deal with its joint venture partner.

The deal values Penguin Random House, which last year contributed £129 million of profits after tax to Pearson's balance sheet, at £2.8 billion.

Random House, which was owned by Bertelsmann, was merged with Penguin-owned Pearson in 2013.

Pearson, which holds a 47 per cent stake in Penguin Random House, will hold 25 per cent post equity sale.

Pearson, which was hit by a sharp downturn in its biggest markets, has sold off some of its best known assets in recent years, including the Financial Times and the Economist, to invest in its core business of education.

The 173-year-old group said it would now reduce its stake in the world's biggest consumer book publisher to 25 per cent, to free up cash to return to shareholders and bolster its balance sheet.

''Combining Penguin with Random House has proved to be a great publishing success, as well as enabling some big cost savings,'' said John Fallon, Pearson's chief executive.

''Today's deal enables Pearson to realise a significant amount of the value we have helped to create while continuing to be part of the world's biggest and best trade publisher.

''We will use the proceeds to maintain our strong balance sheet, invest in our business and return £300m to shareholders.''

Pearson, which has been going through a rough patch which ended with a shareholder revolt over the pay package, including a 343,000 bonus awarded to Fallon at a time when the company was having its worst.

Investors rejected the company's remuneration report at its AGM in May.

Pearson saw its profit waning following a decline in its core US higher education business, where there has been a move away from traditional textbooks and a fall in the number of students.

Shares in the group initially jumped more than 3 per cent on the news but were down 6 per cent by 0900 GMT after analysts said the deal would hurt future dividends.

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