Apollo drops plans to buy Pearson after £7bn bid rejected
Apollo has dropped plans to buy the UK education publisher Pearson after the private equity group’s £7bn takeover offer was rejected.
Apollo “has been unable to reach agreement with the board of Pearson as to the terms of an offer”, the US buyout group said on Wednesday. Under UK takeover rules, it must now walk away from bidding for the publisher for six months.
Apollo made an 870p per share bid on March 28, Pearson said, with an additional 14.2p per share dividend. That marked its third attempt to buy the company. Pearson said it rejected the latest offer because it concluded that it “significantly undervalued the company and its future prospects”.
The move brings an end to a plan that would have been one of the largest-ever private equity deals for a listed UK company, at a time when cash-rich buyout groups are increasingly keen to find bargains on London’s stock market.
It also marks the latest high-profile target that Apollo has circled in the UK without ultimately striking a deal, having previously considered buying supermarkets Asda, and Wm Morrison. The $481bn buyout group is also among the potential buyers of the UK chemist chain Boots.
Shares in Pearson fell 12 per cent following Apollo’s statement.
The deal would have allowed Apollo to draw on a playbook it used when it owned rival textbook publisher McGraw Hill. Under Apollo’s ownership, the company shifted its focus toward digital products. The buyout group sold McGraw Hill to Platinum Equity for $4.5bn last year.
Pearson this month said it had rejected an 854.2p offer from Apollo, and had also rejected an 800p offer in November.
Since joining Pearson in 2020, new chief executive and former Disney chair Andy Bird has sought to transform the FTSE 100 company from a struggling textbook publisher to a digital business appealing directly to consumers.
In the past year, it has launched Pearson+, a $14.99 subscription service likened to Spotify for education, and acquired new edtech and vocational education companies in an attempt to corner opportunities in life-long learning.
Pearson said its board was “confident” in its strategy, adding that its most recent results “demonstrated building momentum”.
Its full-year results released in February showed adjusted operating profit was up 33 per cent to £385mn, and 8 per cent underlying sales growth driven by qualifications and professional certification.
Roddy Davidson, an analyst at Shore Capital, said he regarded Apollo’s initial approach as “opportunistic” and one that “undervalued a high-quality asset” given signs that the outlook for Pearson was improving.
“It feels likes the supertanker has finally been turned, with long-running issues in US higher education much less prominent and [Pearson’s] digital transition taking hold,” he said.