Warburg Pincus LLC and Silver Lake agreed to buy Pearson Plc’s Interactive Data Corp., a provider of financial market data and services, for $3.4 billion, in the biggest private-equity deal this year.
IDC shareholders will get $33.86 for each share they own, London-based Pearson said in a statement today. Pearson will receive about $2 billion before tax for its 61 percent IDC stake, it said. The price is 32.9 percent more than IDC’s closing share price on Jan. 14, 2010, the last trading day before Pearson said it was seeking alternatives for the unit.
“The price is better than expected, which is encouraging and this signals re-entry of private equity into deal flow and the media sector,” said Alex DeGroote, an analyst at Panmure Gordon & Co. in London. The deal had been estimated at about $3.1 billion, he said.
Buyouts are picking up after U.S. stocks rose 30 percent the past year and a rally in credit markets fueled lending. Pearson, which owns the Financial Times newspaper and Penguin Books, said it will use proceeds from the IDC sale to expand through bolt-on acquisitions, with a particular focus on technology and education assets. The company gets 65 percent of its revenue from education businesses.
“Pearson and Interactive Data have extensive growth opportunities and ambitious expansion plans, and we believe this transaction will give both companies greater focus and opportunity to invest more in their strong market positions,” Pearson Chief Executive Officer Marjorie Scardino said in the statement.
Better Than Expected
Pearson shares rose as much as 1.7 percent and were trading 1.6 percent lower at 1,034 pence as of 11:14 a.m. in London. Interactive Data, based in Bedford, Massachusetts, fell 1.4 percent to $32.99 a share in New York trading yesterday, valuing the company at $3.1 billion.
Pearson’s indication it will buy more assets with the proceeds rather than give money back to shareholders may mean the company has some deals already lined up, DeGroote said.
“As a rule of thumb you want to always sell on good news,” he said. “Secondly, you’d want to take your money out now because you don’t know what Pearson will buy and at what price.”
Silver Lake and Warburg Pincus will fund the acquisition with equity investments and debt to be provided by Bank of America Merrill Lynch, Barclays Bank Plc, Credit Suisse Group AG, and UBS AG, according to the statement. The transaction is expected to be closed by the end of the third quarter.
Interactive Data contributed 484 million pounds ($735 million) in revenue and 148 million pounds in operating profit to Pearson last year, the U.K. company said today. After tax and minority interests, IDC’s adjusted earnings were 55 million pounds, or 6.8 pence a share.
“This transaction enables Interactive Data’s shareholders to realize substantial value and provides the company with partners who are committed to supporting it global expansion,” said Rona Fairhead, IDC’s chairman.
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