Pearson plc (LON:PSON) has agreed to sell its US K12 courseware business to Nexus Capital Management for US$250mln as it shifts its focus from textbooks to digital education courses.
The FTSE 100-listed firm said Nexus will pay an initial US$25mln and then a further US$225mln via a vendor loan note due in the next three to five years for the business.
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Following the repayment of the vendor note, Pearson said it would be entitled to 20% of cash flows to equity holders and 20% of proceeds in the event the business was sold.
The group noted that the K12 courseware business, which provides textbooks and resources for US students from kindergarten to 12th grade, generated around £364mln of revenue and approximately £20mln of adjusted and statutory operating profit in 2018.
The company said the transaction is expected to complete at the end of the first quarter of 2019 and cash proceeds generated in due course will be used for general corporate purposes.
John Fallon, Pearson’s chief executive said: "The sale frees us up to focus on the digital-first strategy that will drive our future growth.”
Worries over earnings impact
In early trading, Pearson shares edged 0.3% lower to 917.60p.
However, in a note to clients, analysts at Liberum Capital commented: “The short view is that, while the headline price looks broadly in line with consensus (though more at the lower end), the structure of the deal won't be taken well and the impact on earnings is probably more than would have been anticipated.”
Liberum repeated a ‘sell’ rating and 550p share price target on Pearson.
Pearson is due to report its full-year results on Friday, 22 February.