Pearson Regulatory News (PSON)

18th December 2019

Pearson, the world's learning company, today announces an agreement to sell its remaining 25% stake in Penguin Random House to partner Bertelsmann SE & Co KGaA ("Bertelsmann") for a consideration of approximately $675m / (£530m). The transaction is in line with Pearson's simplification strategy.

This transaction values the Penguin Random House venture at an enterprise value of $3.67bn, compared with the $3.55bn enterprise valuation in 2017 when Pearson sold a 22% stake in the joint venture.

The disposal is subject to regulatory consent and is expected to close in the first half of 2020 and therefore will have no impact on 2019 results. Pearson is committed to its disciplined approach to capital allocation and in early 2020 will commence a return of capital to shareholders through a £350m share buyback. Shares repurchased will be cancelled. The remainder of the proceeds will be used for general corporate purposes.

The formation of Penguin Random House in 2013 created the first truly global consumer book publishing company, with a significant market presence, generating synergies through the integration process and creating significant shareholder value. Our stake2 in Penguin Random House will have generated c.£1.9bn in net disposal proceeds and dividends.

Pearson owns 25% of the Penguin Random House venture which in 2018 reported revenue of $3,703m and EBIT of $467m as reported in € converted at a 2018 average €/$ exchange rate of 1.18, gross assets of $4,407m and net assets of $1,166m converted at a 2018 closing €/$ rate of 1.15. In 2018, Pearson's 25% associate share in the venture contributed £68m after tax to its adjusted operating profit.

John Fallon, Pearson's chief executive, said: "For almost 50 years, Pearson has been proud to play our part in the publishing and commercial success of first Penguin and then more recently Penguin Random House. With the sale of our remaining stake to our partners, Bertelsmann, we know the company is in good hands - and we wish our colleagues and authors every future success. This enables Pearson now to be completely focused on building the world's leading digital learning company, linking education to employability and skills, and reaching more learners around the world to support them through a lifetime of learning."

Notes:

1 Based on guidance $/£ exchange rates of 1.27.

2 47% stake held between 1st July 2013 and 5th October 2017, 25% stake held from 6th October 2017.

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Investors: Jo Russell, Anjali Kotak

Press: Tom Steiner, Gemma Terry

This announcement contains inside information

Ends

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