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Warburg, Silver Lake to Buy IDC for $3.4 Billion

Marjorie Scardino, chief executive officer of Pearson Plc
Marjorie Scardino, chief executive officer of Pearson Plc, is pictured in this undated company photo. Source: Pearson Plc/via Bloomberg

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 33 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 in 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 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.

IDC Shares

IDC, based in Bedford, Massachusetts, rose 23 cents to $33.22 at 10:13 a.m. in New York Stock Exchange composite trading. Pearson shares fell 24 pence to 1,027 pence in London.

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.

IDC 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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