Pearson's $270m teaching deal taps into growing specialist market

Pearson, the publishing group, has bought a business that provides educational testing and teaching material for American school children with learning disabilities.

Pearson, the publishing group, has bought a business that provides educational testing and teaching material for American school children with learning disabilities.

The $270m (£150m) acquisition of AGS Publishing sees Pearson expand in an area targeted by the US government as requiring improvement under the "No Child Left Behind" legislation promoted by President George Bush. Pearson's United States educational publishing interests are its dominant business.

Analysts said the deal was a good strategic fit and expected more acquisitions to follow, given the balance sheet boost provided to Pearson by its sale in late 2004 of its interest in Spanish newspaper group Recoletos for €743m (£490m).

AGS, which was sold by WRC Media, creates tests for children with learning difficulties that are administered in schools by teachers and psychologists. Its materials also apply to children whose first language is not English. AGS also provides material to teach such children, who make up 6 per cent of the school population but attract 22 per cent of secondary and elementary spending.

AGS's sales increased last year and also this year by more than 20 per cent. Analysts at CSFB, the broker, said: "Strategically, the deal also gives Pearson greater exposure to the test creation market, an area where Pearson has been weak.

"We have nagging concerns that Pearson's test administration business is vulnerable to the test creation market leaders - Reed Elsevier, McGraw-Hill - leveraging their test creation relationships in the digital world into test administration [tagging on a scoring function to their tests], putting more competitive pressure on Pearson.

"In our view, this transaction also needs to be seen as part of Pearson's response to this threat."