Britain's Pearson (psorf) has agreed to sell a 22% stake in book publisher Penguin Random House to joint venture partner Bertelsmann for around $1 billion to bolster its balance sheet and return cash to shareholders.
Pearson, restructuring after a string of profit warnings from its education unit, said the sale would enable it to return 300 million pounds ($386 million) of surplus capital to shareholders via a share buyback.
The deal, which values the book publisher at an enterprise value of $3.55 billion, will also enable the two groups to recapitalize the business to produce a net debt to core earnings ratio of two times, giving the two partners a dividend.
Pearson, which reiterated its guidance for 2017, said its holding in Penguin Random House would fall to 25%. It will be subject to an 18-month lock-up period from closing of the deal, during which it cannot sell any more of the stake.
"Combining Penguin with Random House has proved to be a great publishing success, as well as enabling some big cost savings," said Chief Executive John Fallon.
"This has benefited readers, authors, and shareholders. Today's deal enables Pearson to realize a significant amount of the value we've helped to create whilst continuing to be part of the world's biggest and best trade publisher."
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Pearson said it now planned to pay a "sustainable and progressive" dividend that is comfortably covered by the earnings of its ongoing business, excluding any contribution from the book publisher.