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Last updated: September 27, 2006 7:25 pm

Wolters puts educational arm up for review

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Wolters Kluwer could reap about €600m ($760m) from selling its education business, analysts said on Wednesday as the Dutch publisher put the division up for review and unveiled new growth goals to round off a three-year restructuring process.

Shares in Wolters closed 4.4 per cent higher at €20.50 after it appointed Lehman Brothers to “explore strategic alternatives” for the unit, which many analysts have argued does not fit with Wolters’ core portfolio.

Nancy McKinstry, chief executive, warned that selling all or part of the division was “not a foregone conclusion”.

But she added that it would be a challenge for the education business to expand internationally or into adjacent markets in the way she said its other divisions would seek to grow.

Wolters Kluwer Education is one of Europe’s largest publishers of primary, secondary and professional educational materials, with businesses in the Netherlands, Sweden, the UK, Germany, Belgium, Austria and Hungary.

Analysts said the business could fit with SanomaWSOY, the Finnish media group; private equity groups; or Pearson, the educational publisher and owner of the Financial Times. Reed Elsevier, the Anglo-Dutch publisher, was seen as a less likely suitor, given its competing UK business. Pearson and Reed would not comment and Sanoma could not immediately be reached for comment.

With 2005 turnover of €309m, analysts estimated a sale could raise between €500m and €700m, but Ms McKinstry said it was “premature” to discuss how any proceeds might be used.

Noting the investment required as scale and technology became more important in educational publishing, Wolters said it had other priorities for its cash – expanding its core legal, tax and health divisions in adjacent fields of activity and emerging markets.

The announcement came as Mrs McKinstry set a new organic revenue growth target of 4-5 per cent beyond 2007, up from the current 4 per cent goal for 2007, and promised double-digit growth in ordinary diluted earnings per share.

She also said the company would use available cash to increase its dividend, repay debt and for acquisitions. Wolters proposes raising the 2006 dividend by 5 per cent to €0.58, as analysts had expected.

Operating margins would "continue to improve" from the 19-20 per cent operating margin targeted for 2007, Ms McKinstry said.

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