Apollo Global Management Inc. said it is evaluating a possible cash offer for Pearson Plc, the London-based education and publishing company that’s been undergoing a long and rocky turnaround effort.
Shares of Pearson, which has a market capitalization of 5.9 billion pounds ($7.7 billion), jumped as much as 26 percent to 818 pence, the biggest intraday increase in 22 years. Its stock had risen earlier in the morning following a report on the Betaville blog about a possible approach for the company.
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+.
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 percent, according to a company filing. That makes it Pearson’s largest shareholder, according to Bloomberg data.
That gives Cevian the power to block any approach from Apollo as U.K. takeover rules require 90 percent shareholder approval for any delisting, according to John Davies, senior analyst at Bloomberg Intelligence.
Representatives for Pearson and Cevian didn’t immediately respond to requests for comment.
What Bloomberg Intelligence Says
Apollo Global’s potential cash offer for Pearson makes sense to us — with the 2012-21 ownership of smaller rival McGraw-Hill affording it the relevant experience to judge the worth of its market-leading U.S. higher education business — though a successful bid would need to significantly top Cevian Capital’s (10.2 percent holder) average 570 pence-a-share price.
–John Davies, senior BI telecom, media and internet analyst
Apollo now 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. The firm said in a statement there is no certainty if an offer will be made or what the terms might be.
Were it to proceed, this wouldn’t be 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.