Pearson acquisition

An international media and education company, providing educational materials, technologies, assessments and related services to teachers and students.  Owner of The Financial Times and part owner (47%) of Penguin Random House.  I have a holding in my income portfolio (epic code: PSON).

Coming fast on the heels of their disposal of Mergermarket, commented on here, today Pearson announced the acquisition of Grupo Multi, the leading adult English Language Training company in Brazil.

They will acquire Grupo Multi for approximately £440m (R$1.7bn) in cash and the assumption of £65m (R$0.25bn) of debt. In 2012, Grupo Multi generated operating profits of £42m (R$130m), so an EV/EBIT valuation of 15x in the local currency.

Pearson is paying a full price for what is the largest provider of private language schools in Brazil, they serve over 800,000 students across more than 2,600 franchised schools.  Brazil is one of the world's largest English Language Learning markets with the English Language Training market estimated to be worth £2bn (R$7bn), hence the price.

So Pearson are losing £25m EBIT from the Mergermarket disposal and replacing it with £33.7m EBIT (at today's exchange rates) from the acquisition of Grupo Multi for a net outlay of £123m (£505m for Grupo Multi less £382m from Mergermarket), in addition to greater exposure to a fast growing emerging market.