Kindersley family nets £100m as Pearson buys DK

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The Independent Online

Dorling Kindersley, Britain's biggest publisher of consumer non-fiction books, bowed to the pressures of globalisation yesterday with an agreed sale to Pearson, the international media and publishing group, for £311m in cash.

DK was put up for sale in January after it issued a profits warning related to over-production of books and products tied to the Star Wars movie series. Yesterday DK, whose reference titles include the Eyewitness series, reported a £25m pre-tax loss after exceptionals for the six months to December compared with a pre-tax profit of £4.7m a year earlier.

Pearson offered 430p per share, and through Cazenove, the City broker, snapped up a 29.9 per cent stake in the stock market. Peter Kindersley, executive chairman of the company he co-founded in 1974, and other directors gave irrevocable undertakings for a further 30.6 per cent of the shares.

"We've been talking to all the usual suspects, but at the end of the day Pearson offered the best opportunity," Mr Kindersley said.

Mr Kindersley and his family, who also have stakes in the company, will receive close to £100m from the deal.

DK will be integrated with Penguin in the UK and with Penguin/Putnam in the US. Mr Kindersley will assist in the transition, expected to take six weeks, and will take a part-time non-executive role in the online business.

Linking DK with Penguin is expected to create cost savings in distribution, printing and business systems. Distribution of DK titles, especially to retail channels in the US where Pearson is the biggest educational publisher, will also be expanded. Pearson will also use DK online content in its education network partnership with AOL.

Since the January earnings warning, when James Middlehurst, chief executive, resigned, DK had been linked with several potential buyers thought to have included the French publisher Hachette, Granada, and Bertelsmann of Germany. DK had struggled financially since the mid-1990s.

Analysts have said the company was too small to invest in content and distribution while catering to City financial demands. Anthony de Larrinaga, analyst with SG Securities, said: "It's a small [company] running into cash problems from having overreached itself. It shows that if you're a big media group with cash and distribution you can be there to pick up the pieces."

DK stock closed up 11.5p at 425p, while Pearson added 120p to 2181p.