Last updated: November 29, 2013 5:51 pm

Pearson agrees to sell Mergermarket unit to BC Partners

John Fallon at Pearson headquarters in London, October 2, 2012

Pearson has agreed to sell its Mergermarket unit to London private equity investor BC Partners in a transaction valuing the business intelligence and news service at £382m including debt.

The London-listed owner of the Financial Times intends to “redeploy the proceeds from the sale in its global education business”, it said in a statement on Friday.

“The company has flourished under Pearson’s ownership but it is not part of Pearson’s strategy in global education,” John Fallon, Pearson’s chief executive, commented. “The transaction provides us with additional financial capacity to accelerate our push into digital learning, educational services and emerging markets.”

Based on the deal’s enterprise value, Mergermarket is being sold for more than 15 times last year’s operating income of about £25m. Pearson bought Mergermarket seven years ago for £101m, net of the cash that was on its balance sheet.

Pearson subsequently paid an additional amount based on Mergermarket’s performance. It did not disclose the “earn-out”, but notes to annual reports suggest it was less than £29m.

“The price is good” for Pearson, said Ian Whittaker, an analyst at Liberum, adding that the focus on new acquisitions would dampen some investors’ hopes of share buybacks.

Pearson, the world’s largest educational publisher by revenue, announced a £200m restructuring programme at the beginning of the year as it seeks to shift away from textbook sales and to digital technologies, particularly in emerging markets.

In July, when Pearson announced the planned sale of Mergermarket, the group also entered a publishing joint venture with Germany’s Bertelsmann. Mr Fallon, who took over as Pearson’s chief executive this year, has said the pace of restructuring would accelerate into the first half of 2014.

“As we developed our strategy – identifying along the way an increasingly important role for the FT – it was in truth impossible to see how Mergermarket could contribute to Pearson’s ambitions in global education,” Mr Fallon said in a note to staff on Friday.

BC Partners, the buyout fund manager whose holdings include Phones4U and estate agent Foxtons, is buying Mergermarket after a competitive process that initially attracted interest from 50 companies and private equity groups, including Thomson Reuters, Bloomberg, Fitch Ratings, and Advance Publications, the parent company of Condé Nast. In the end, only BC Partners and New York-based Warburg Pincus remained in the bidding, said a person involved in the sale process.

BC Partners, which manages a €6.5bn buyout fund, intends to help the company grow through “selective” acquisitions, to boost its subscription-based news services, which it described, as “essential to customers given the unique and specialist nature of the information and analysis they contain”.

Mergermarket is a “market leader with an attractive business model, strong growth, and loyal customers”, said Nikos Stathopoulos, the partner at BC who is leading the investment.

Mergermarket, started in 1999 and headed by Hamilton Matthews, operates brands including Mergermarket, Debtwire, DealReporter, Infinata, Wealthmonitor and Xtract Research in 65 countries.

Pearson’s revenues grew 2 per cent year-on-year in the first nine months of this year on an underlying basis. It said it expected adjusted earnings per share for the full year to be broadly flat. In December 2011 it sold a 50 per cent stake in FTSE International, the stock index provider, for £450m.

HSBC advised BC Partners while JPMorgan Cazenove acted as financial adviser to Pearson.

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