Pearson is selling its last shares in Penguin Random House, representing 25% ownership of the company, to Germany's Bertelsmann, which will now have 100% ownership of the trade publisher. The sale is expected to generate $675 million, based on an enterprise valuation of PRH at $3.67 billion. It will be completed in the second quarter of 2020.
When the merger between Pearson's Penguin and Bertelsmann's Random House was initiated in 2012, Bertelsmann took at 53% share and Pearson a 47% in the partnership. Pearson then sold 22% of its share to Bertelsmann in 2017.
Thomas Rabe, chairman and CEO of Bertelsmann and chairman of the board of directors at PRH, cheered the acquisition of total ownership. “The increase to 100% is a milestone for Bertelsmann," he said. "For us and our shareholders, the transaction is commercially attractive, as the share of Bertelsmann’s shareholders in group profit will increase by more than €70 million per year.”
Markus Dohle, CEO of PRH, noted, “The full acquisition of Penguin Random House is a testament to Bertelsmann’s belief in the future of books and reading, as well as their trust in our colleagues around the world to be able to grow our company over the next several years."
Rabe said he expects PRH to continue to expand both through organic growth and acquisitions. In a letter to employees last week, Dohle made a similar statement after listing the acquisitions PRH has already made in 2019 in different parts of the world.
The sale of its final stake in Penguin, marks the end of Pearson's long run with the publisher. "For almost 50 years, Pearson has been proud to play our part in the publishing and commercial success of first Penguin and then more recently Penguin Random House," said Pearson CEO John Fallon, in a prepared statement. "With the sale of our remaining stake to our partners, Bertelsmann, we know the company is in good hands.
Pearson has been struggling with a falloff in revenue from the company's U.S. education division and will likely benefit from the infusion of cash, though it also indicated that it will use £350 million ($457 million) from the sale for a stock buyback program.
In a separate statement, Pearson said Fallon will leave his position as CEO at the end of the next year, once an orderly transition of leadership can be assured.