Publisher Pearson PLC (PSON.LN) Thursday doubled its footprint in Brazil with the acquisition of Sistema Educacional Brasileiro's learning systems business for GBP326 million in cash as part of a strategic partnership to develop educational products and services for the developing Brazilian education market.

Pearson, which has extensive education operations in the U.S., will also provide technology and materials to SEB's educational institutions as part of the deal--the group's biggest education business purchase outside of North America.

The Zaher family, which owns 70% of SEB, will retain the group's school and higher education institutions, which will become major customers of Pearson.

Brazil is one of the world's largest education markets with 56 million students and an educational materials market valued at approximately $2 billion. Around 25% of Brazil's 192 million population are under the age of 14. SEB, which was founded more than 40 years ago and listed on Bovespa in October 2007, has strong positions in several key segments of the Brazilian education market, according to Pearson.

SEB provides learning systems to pre-school, primary and secondary schools. In addition, it offers undergraduate and graduate programs to approximately 9,000 college students, distance learning courses, test preparation and further education programs.

"Given the size and growth prospects of its education sector, Brazil has been a focus for Pearson for some time," said John Fallon, chief executive of Pearson's international education company, in a statement.

Pearson, which also publishes the Financial Times newspaper and Penguin books, expects the purchase to be earnings enhancing from 2011, the first full year following the acquisition, and to generate a return on invested capital above Pearson's weighted average cost of capital from 2012.

The deal is the company's second acquisition since it sold its 61% stake in Interactive Data Corp. (IDC) for around $2 billion before tax in May, and was well received by the market.

It "looks like a sensible step as it reinvests some of the cash flows from the IDC disposal and seems to have been done on reasonable terms," Royal Bank of Scotland analyst Paul Gooden said. He has a hold rating on Pearson and a target price of 865 pence.

At 0845 GMT, Pearson shares were up 7 pence, or 0.8%, at 934 pence, valuing the company at GBP7.54 billion in a slightly higher London market.

Under the terms of the deal, Pearson will pay 70% of the total purchase price to the Zaher family once the learning systems business has been separated from SEB. It will than undertake a delisting tender offer and pay the remaining 30% to SEB's public shareholders.

Completion of the deal isn't conditional on antitrust or other regulatory approvals, but it will be reviewed by Brazilian antitrust authorities. Pearson expects to wrap up the deal in the second half of 2010.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com
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