(Bloomberg) — Pearson Plc, the education and publishing company that’s in the midst of a long and rocky turnaround effort, said two offers from Apollo Global Management Inc. “significantly undervalued” the business.
A preliminary and conditional November cash offer of 800 pence per share was rejected, as was a March 7 proposal for 854.2 pence per share, London-based Pearson said in a statement Friday. The first valued the company at about 6.1 billion pounds ($8 billion) and the second at about 6.5 billion pounds.
Apollo said earlier on Friday it was evaluating a possible cash offer for Pearson, and there is no certainty if an offer will be made or what the terms might be. The private equity firm has until the end of April 8 to announce a firm intention to make an offer or to withdraw, according to U.K. takeover rules.
Pearson’s shares jumped as much as 26% to 818 pence, the biggest intraday increase in 22 years after the Apollo statement Friday, and gains after the company’s later statement pushed it as high as 834 pence. The stock traded at 781 pence at 2:22 p.m. in London.
Pearson has been battling a decline in its traditional business of college publishing. Chief Executive Officer Andy Bird, a former Walt Disney Co. executive who took over in October 2020, has focused on direct-to-consumer digital opportunities by launching a new app called Pearson+.
Pearson’s board is “mindful of its fiduciary duties in the event that an appropriate proposal is forthcoming,” it said in the statement.
Apollo didn’t immediately respond to a request for comment following Pearson’s announcement.
Cevian Holdings
Meanwhile Europe’s largest activist investor, Cevian Capital AB, has been gradually increasing its stake in Pearson since June 2020. It currently owns 10.2%, according to a company filing. That makes it Pearson’s largest shareholder, according to data compiled by Bloomberg.
That gives Cevian the power to block any approach from Apollo as U.K. takeover rules require 90% shareholder approval for any delisting, said John Davies, senior analyst at Bloomberg Intelligence.
Cevian didn’t respond to a request for comment.
This isn’t Apollo’s first foray into the sector: it bought Pearson’s biggest U.S. competitor McGraw-Hill Education Inc., and attempted to merge it with another publisher, Cengage Learning Inc. That deal faced competition concerns, and Apollo then sold McGraw to rival buyout firm Platinum Equity in June last year.
Given the failed attempt at consolidating the industry, Apollo could take the opposite approach and explore a breakup, Davies said.
“They could maybe take more chunks off Pearson than has currently been done,” he said. “It’s not entirely obvious what synergies between some of the businesses are, apart from being in education.”
Apollo was advised by Barclays Bank. Citigroup, Morgan Stanley and Goldman Sachs advised Pearson.
(Updates with share prices, details from statement from third paragraph.)
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