US private equity launches £7bn swoop on Pearson: Shares in under-siege publishing giant soar 18% after snubbing two bids from Apollo
- Pearson has rejected two offers from US buyout giant Apollo
- Publisher said latest offer ‘significantly undervalued the company’
- Apollo publicly confirms pursuit and is expected to come back a third time
Shockwaves rippled through the City yesterday as Pearson became the latest FTSE 100 group to be targeted by private equity.
Following a wave of takeovers since the start of the pandemic, the publishing and education company said it was being attacked, and has rejected two offers from US buyout giant Apollo.
Pearson turned down an offer worth 800p a share or £6.1billion in November and an improved bid of 854.2p a share or £6.5billion on Monday. Including Pearson’s debt pile of £500m, the latest offer valued the firm at £7billion. Shares rose 18 per cent, or 117p, to 766.6p.
Under attack: US private equity giant Apollo has launched a £7billion swoop on Pearson
The move was greeted with dismay at the prospect of the publisher – one of London’s oldest blue chip stocks – falling into private equity hands.
Pearson said last night that the latest offer on March 7 ‘significantly undervalued the company and its future prospects’.
But despite being rejected twice, Apollo publicly confirmed its pursuit of Pearson and is expected to come back a third time.
An Apollo spokesman said: ‘Apollo notes the recent market speculation and is in the preliminary stages of evaluating a possible cash offer.’
Analysts speculated that Apollo would need to table a bid of 900p a share – valuing the business at £6.8billion or £7.3billion including debt – to realistically take the company off the market.
Sources close to the company said Pearson management will not roll over, with chief executive Andy Bird and chairman Sidney Taurel both believing they can turn the business around while still listed on the stock market.
Pearson has struggled in recent years as it tries to move its education division online but there was surprise that yet another UK listed business could succumb to private equity.
Analyst Sarah Simon at Berenberg Bank said: ‘What this really shows is that private equity is a truly global business. They have a lot of cash and any company whose share price is at a historic low had better be looking over their shoulder.’
Private equity has been circling the UK’s largest businesses since the pandemic began as stock market valuations in the UK are believed to be cheap. The industry has £1.8trillion worth of funds to spend, according to data from S&P Global, and is stalking the UK market looking for deals.
Morrisons supermarket was acquired by Clayton, Dubilier & Rice for £7billion in October last year following the takeover of Asda by the billionaire Issa brothers and their private equity backers TDR Capital.
Pearson was founded in 1844 as an engineering business and the firm grew rapidly. In 1969 Pearson listed in London and under chief executive Dame Marjorie Scardino in the 1990s the firm was established as a publishing powerhouse. But it started to decline as its businesses were slow to react to online publishing.
In 2013 John Fallon took over as chief executive and under his leadership Pearson sold assets and slashed staff.
In 2015 Pearson sold the crown jewels, offloading the Financial Times to Japan’s Nikkei and its 50 per cent stake in The Economist to the Agnelli family, who also own Italian football giant Juventus.
The firm became an education business only but struggled as students rebelled against paying high prices for textbooks and, as a result, the company’s share price was decimated.
Apollo has hired Barclays to work on the bids, while Morgan Stanley, Citi and Goldman Sachs are representing Pearson.
Pearson shareholders, including hedge fund Cevian and fund managers Schroders and Silchester, declined to comment on the bids.