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Pearson sells 22% stake in Penguin Random House

11 July 2017 07:24

Pearson said it has agreed to sell a 22% stake in Penguin Random House (PRH) to partner Bertelsmann SE & Co KGaA and recapitalise the business generating total net proceeds of about $1bn.

The deal would also strengthen Pearson's balance sheet, return £300m of surplus capital via a share buyback and maintain a significant income stream from an ongoing 25% stake in the consumer publisher.

"In January we also announced our intention to rebase our dividend. Today we are announcing that our future dividend policy will be to pay a sustainable and progressive dividend that is comfortably covered by the earnings of our ongoing business excluding any contribution from PRH," said Pearson.

"This transaction values the Penguin Random House Venture at an enterprise value of $3.55 billion.

"The formation of PRH in 2013 created the first truly global consumer book publishing company, with a significant market share lead over its nearest competitors.

"Over the last four years PRH has enjoyed significant creative and commercial success and delivered more than $150m in annualised integration benefits, increasing profit and margins and creating significant value for both partners."

As part of the agreement, PRH would undertake a recapitalisation to 2.0-times net debt / EBITDA, distributing dividends to both partners.

"This recapitalisation will be achieved in two steps with PRH initially recapitalised to 1.5x on closing of the transaction, increasing to 2.0x in April 2018.

"At closing, Pearson will receive total net cash proceeds from this tax-efficient transaction of approximately $968 million from the sale and associated dividend payments from the initial recapitalisation of PRH. We will receive a further $66m in April 2018."

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