UK Pearson sells Wall Street English for $300m to cut back debts

British Education group, Pearson, has agreed to sell its English language business Wall Street English (WSE) to a group of funds affiliated with Baring Private Equity Asia and CITIC Capital for $300 million, about £225 million.

The transaction, rumoured to be “near” since the start of November, is expected to close in the first half of 2018, subject to regulatory approvals.

Details of the deal indicate that Pearson’s net debt will only improve by $100 million as around $150 million of operating cash will be retained in the disposed business and $50 million spent on tax and transaction fees.

The deal follows from comments last February by its chief executive officer, John Fallon, that the company was looking at cost savings this year “urgently” after facing challenges in the US education market.

At the time the company said it was exploring options to shift away from large-scale direct delivery services, including a potential partnership for WSE and the sale of Global Education (GEDU).

According to Pearson, after an “extensive” review of options for WSE, it concluded the full disposal of WSE was “the approach best aligned with our objective to simplify Pearson and focus on fewer bigger opportunities”.

“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,” commented John Fallon.

Pearson, which has sold several assets including the Financial Times newspaper and the Economist magazine to focus on its core education business, has been hit by a slowdown in the United States, and from the shift to digital from paper textbooks, has cut thousands of jobs and restructured following a string of profit warnings in recent years.

Specifically, in May, it undertook to reduce costs by £300 million. In August, it agreed the sale of its English test preparation business, Global Education (GEDU), to Puxin Education to generate $80 million, and also plans to slash another 3,000 jobs by 2020.

In October Pearson completed the sale of a 22 percent stake in Penguin Random House to co-shareholder Bertelsmann. Previously it had a 50 percent stake in the Economist and owned the FT. Both assets were sold off in 2015.

Shares in the group slipped 1.7 percent in early Monday trading on disappointment a business that teaches English to adults in multiple countries including China had not brought in more.

The sale will, however, reduce the number of people working for Pearson, as WSE currently employs around 3,600 people. Pearson said in August it would cut 3,000 jobs, which at the time accounted for almost 10 percent of the group total.

Pearson bought the language-training business from private equity group, Carlyle, for an approximate sum of $240 million between 2009 and 2010; first acquiring the operations in China before buying the global business.

It announced in February it was seeking a strategic partner for Wall Street English as part of a strategic review after the group recorded its biggest ever loss following a write-down of its US higher education and testing business last year.

The disposal is the latest in a series of sales by Pearson as it seeks to transform from a broader media and publishing group to one focused on education.