Debt-Laden Private Buyouts Are Back – Pearson Sells IDC For $3.4 Billion

Pearson (NYSE: PSO) said back in January it wanted to sell Interactive Data Corporation, its financial market data analytics provider. And now it is – for a pretty sum.

Silver Lake and Warburg Pincus funds are teaming for a $33.86-a-share acquisition totalling $3.4 billion. If that’s an eyebrow-raiser, well Pearson says the pair have “fully committed financing” comprising of the buyers’ own equity plus debt financing from an all-star line-up of Bank of America Merrill Lynch, Barclays Bank PLC, Credit Suisse Securities (USA) LLC and UBS Investment Bank. Who says the banks don’t have money to spend anymore?

Why’s Pearson selling?

The publishing group owns Financial Times and Penguin Books but the biggest part of its business is its education services. Pearson, which owns 61 percent of IDC, says the deal gives it $2 billion and it “intends to use the proceeds of the sale to accelerate the expansion of its businesses, including through bolt-on acquisitions, with a particular focus on adding complementary technology and services to its international, consumer and professional education businesses”.

IDC was housed in Pearson’s FT Group, of whose sales it comprised over half. That it hasn’t been leveraged more through the FT may seem strange. The FT itself has done a few small acquisitions in the financial analysis space over the last year. But the deal lets Pearson concentrate on its core education business. Pearson CEO Marjorie Scardino: “This transaction will give both companies greater focus and opportunity to invest more in their strong market positions.”

IDC made £484 million in sales in 2009 and forecast $810 million to $830 million for 2010. IDC is nearly four times more profitable than the FT itself, making up £148 million of FT Group’s £187 million 2009 operating profit. It contributed £55 million to Pearson’s reported earnings.