Pearson Continues to Simplify With Sale of Wall Street English

Pearson Continues to Simplify With Sale of Wall Street English

Pearson (London/New York) in November agreed to sell Wall Street English, which operates learning centers in China and Italy, to a consortium consisting of funds affiliated with Baring Private Equity Asia and CITIC Capital. The transaction is scheduled to close in the first half of 2018 subject to regulatory approval.

The sale of Wall Street English is expected to generate gross cash to Pearson of around $300 million after adjustments for assumed deferred revenue and historical tax liabilities. Tax and net transaction costs are expected to be around $50 million.

Pearson’s improvement in net debt as a result of the transaction will be approximately $100 million, as around $150 million of operating cash will be retained in the disposed business. Pearson had net debt of £1.3 billion at the end of September.

Why Sell?

“The sale of Wall Street English is part of our continued effort to focus on a smaller number of bigger opportunities in global education and to become simpler and more efficient,” said Pearson chief executive John Fallon.

Pearson said it had begun exploring strategic options to shift away from large-scale direct delivery services when announcing 2016 financial results. After a review of the options for Wall Street English, management concluded that the full disposal of WSE was the approach best aligned with the objective to simplify Pearson and focus on the bigger opportunities.

Pearson acquired Wall Street English China in 2010 and the rest of the Wall Street English network in 2011. In 2016 WSE served 180,000 learners and owned 70 centers in China, nine centers in Italy and 321 franchised centers across 27 territories. It contributed £175 million in revenue, an adjusted operating profit of £7 million and a statutory operating profit of £4 million to Pearson.

Wall Street English had approximately 3,600 FTE employees at the end of June 2017. In August, Pearson indicated it was looking to cut 3,000 jobs, almost 10 percent of the company’s 32,000 total.

Pearson sold its Global Education business to Puxin Education (Beijing, China. Global Education in August 2017, which provides English-language learning and test preparation services for students who will be taking English-language assessments in China, was acquired by Pearson for $155 million in 2011. Global Education served 64,000 learners in 2016 and had revenue of £78 million. Pearson expected to realize gross cash proceeds of $80 million from that sale.

Pearson sold TutorVista and Edurite in July 2017 to education app provider Byju (Bengaluru, India), a company that was looking to extend its product offerings and expand in international markets. TutorVista, acquired by Pearson in 2005, is a worldwide online tutoring company. Edurite provides CDs and worksheets for elementary students.

Pearson’s Year-to-Date Sales

Pearson sales through the the first nine months of 2017 were down 2% in underlying terms, largely due to expected decreases in North American school assessment revenue, school and higher education courseware, and the retirement of the learning management system Learning Studio. Pearson’s declines were partially offset by growth in professional certification, online program management, and at Connections Education.

Pearson stock closed at a price-per-share of $9.38 on Nov 24 prior to the WSE sales announcement and at $9.21, down 1.9%, on Nov. 27 following the announcement.

 For more information on Pearson and other leading providers of educational resources, check out Simba Information’s reports Publishing for the PreK-12 Market, 2017-2018 andState of College Course Materials, 2016-2017.