Pearson to sell 22% stake in Penguin Random House to Bertelsmann
Pearson is to sell a 22% stake in its publishing unit Penguin Random House to Germany's Bertelsmann for around one billion US dollars (£776 million).
The education group will retain a 25% stake in Penguin Random House, and the deal will allow it to return £300 million to shareholders via a share buyback.
The proceeds, Pearson said, will also allow it to strengthen the balance sheet and invest in its digital transformation.
John Fallon, chief executive of Pearson, said: "Combining Penguin with Random House has proved to be a great publishing success, as well as enabling some big cost savings. This has benefited readers, authors, and shareholders.
"Today's deal enables Pearson to realise a significant amount of the value we've helped to create whilst continuing to be part of the world's biggest and best trade publisher.
"We will use the proceeds to maintain our strong balance sheet, invest in our business and return £300 million to shareholders."
Pearson has had a difficult time of late and in February posted a dismal set of annual results, which included a £2.5 billion impairment charge, pushing the former Financial Times owner to a record £2.6 billion loss.
The firm has also issued a string of recent profit warnings.
Pearson shares tumbled over 7% to 638.6p in morning trading.
Ian Whittaker, analyst at Liberum, said: "Pearson's conference call on its disposal of 22% of Penguin Random House does not seem to have gone well with investors.
"We suspect one of the main issues is on the dividend, which Pearson's comments suggesting a dividend level in the mid to high teens pence level, or only a 2%+ dividend yield, which will deter income investors but also would seem to suggest that Pearson is concerned over the need to protect its balance sheet moving forwards."