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Pearson balances the books with $1bn Penguin sale

Pearson balances the books with $1bn Penguin sale

Troubled publishing giant Pearson has shored up its balance sheet with the sale of a 22% stake in Penguin Random House to German mass media firm Bertelsmann.

The deal values the publisher, responsible for titles such as Fifty Shades of Grey and Girl on the Train, at £2.75bn, providing a much-needed cash infusion after it was forced to place its stake in the publisher up for sale to steady the ship in the wake of a succession of profit warnings.

Pearson merged Penguin with Random House in 2012, taking a 47% stake in the combined business that now publishes one in every four books sold in the UK, equating to 800m physical, digital and audiobooks every year.

Pearson will use the $1bn proceeds from the sale to finance its push to establish itself as a digital education publisher.

Explaining this shift, chief executive John Fallon said: “The future of Pearson is as the world’s digital learning company. It is challenging, it is difficult. We need to make sure we can invest what we need to invest to make that digital transformation. I do think you need to see this particular move as a continuation of a strategy that goes right back to 2012.

"From the moment we combined Penguin with Random House and took a minority stake, from that point we made clear the strategic direction of the company.”

Pearson retains a 25% stake in penguin Random House, which it cannot sell for a minimum of 18 months, with Bertelsmann being offered first option to purchase if and when it comes up for sale.

Last year Pearson sold the FT Group to Nikkei for £844m.

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