Pearson Agrees to Sell 22% Stake in Penguin Random House

UK education and publishing firm Pearson said on Tuesday that it has agreed to sell a 22% stake in book publisher Penguin Random House to its German joint venture partner Bertelsmann in a transaction that will also recapitalize the business generating proceeds of about $1 billion for Pearson. The deal values Penguin Random House at $3.55 billion in enterprise value, Pearson said in a statement on Tuesday. Pearson will retain a 25% stake in the publisher, it said. The transaction is expected to close in September this year, subject to regulatory approval.

Pearson said it will use the proceeds to maintain a strong balance sheet and invest in its business and it plans to return 300 million pounds ($387 million) to shareholders after the transaction has closed. As part of the agreement Penguin Random House will undertake a recapitalisation to 2.0 times net debt / EBITDA, distributing dividends to both partners. Pearson said that this recapitalisation would be achieved in two steps with Penguin Random House initially recapitalised to 1.5 times on closing of the transaction, increasing to 2.0 times in April 2018.