Pearson bags $1 billion with Penguin Random House stake sale but shares tumble
Struggling Pearson raised $1 billion (£780 million) today to ease its woes and placate investors, by selling a 22% stake in Penguin Random House to joint venture partner Bertelsmann.
The former FT owner, now focused on education, will retain a 25% stake in PRH having opted against a full sale.
It will use that $1 billion to buy back £300 million of its own shares and boost this year’s dividend.
Pearson has issued a batch of profit warnings this year, threatening the survival of chief executive John Fallon, who said: “Combining Penguin with Random House has proved to be a great publishing success, as well as enabling some big cost savings.”
Although today’s deal was mostly welcomed by the City, some still think the shares could halve from here.
Despite early gains, the shares later dropped sharply, down 6% or 41p at 649.5p.
Analysts at Liberum think a truer value would be 360p and again told clients to ditch the stock. It said: “Pearson has done a fair job of trying to square the circle of limiting dilution and protecting the balance sheet but that the details of the deal are not great”. It added: “Fundamental issues are still not resolved.”
Pearson is facing a decline in its core US higher-education arm, which has been hit by a fall in student numbers.
