2nd UPDATE:Pearson Doubles Footprint In Brazil With GBP326 Million Buy
22 Julio 2010 - 5:49AM
Noticias Dow Jones
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.
Pearson expects the business to generate revenues of around 160
million Brazilian reais in 2010 based on current market conditions,
and to continue to grow rapidly. It booked average organic revenue
growth of more than 20%, supplemented by acquisitions, and
operating margins of around 35% over the past three years,
according to Pearson.
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 0956 GMT, Pearson shares were up 12 pence, or 1.2%, at 946
pence, valuing the company at GBP7.57 billion in a 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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