Pearson pays $950m for two of Reed's Harcourt Education units

Pearson has bolstered its US assessment and international text book divisions after purchasing two Harcourt units from Reed Elsevier in a $950m (£477m) deal.

Reed Elsevier put its Harcourt Education division up for sale in February to focus on its science, medical, legal and business-to-business operations. The entire division is expected to fetch up to $4.7bn.

The acquisitions follow a spate of activity in the education publishing market with Thomson and Wolters Kluwer also exiting the market.

Pearson has snapped up Harcourt Assessment, a Texan-based exam-testing company, to bolster its existing US assessment business. The testing market has been given a fillip by the "No Child Left Behind" Act in the US that has seen education authorities invest in more stringent testing, but the sector has been hit by local difficulties. Harcourt has recently lost key contracts in the testing space due to problems marking exams. In November, Reed warned that the business would miss its annual growth target for the second consecutive year.

Pearson has also purchased Harcourt Education International, an Oxford-based publisher of text books that sells into markets including the UK, Australia, New Zealand and South Africa. Pearson has previously said it wanted to expand its education publishing business internationally.

The sale of the two units leaves Reed with the lion's share of Harcourt Education still to sell, comprising its large US text books business and a number of supplemental publishing businesses.

Pearson already holds a market-leading position in the US textbook market and would not be interested in the main Harcourt business on account ofregulatory concerns. Reed said it expects to complete the sale in the second half of the year and will use the funds raised to return cash to shareholders.

Marjorie Scardino, the chief executive of Pearson, said: "We have long admired these businesses." The deal is expected to enhance Pearson's earnings from 2009 and the company, which publishes the Financial Times, will also benefit from a tax benefit of $125m that will reduce its effective tax rate in 2008.

Sir Crispin Davis, Reed Elsevier's chief executive, said: "We are delighted to have successfully sold the Harcourt assessment and international education businesses to a good home, achieving an excellent price."