Pearson, the media and publishing company, is poised to double the size of its US education publishing interests, following the pounds 377m acquisition of HarperCollins College and ScottForesman from Rupert Murdoch's News Corporation.
Analysts said the price, at only 1.8 times 1995 revenues, was less than expected and would have a small positive effect on earnings this year.
Lord Blakenham, Pearson's chairman, said: "We feel this is a very attractive price and an excellent fit for Pearson." The company already owns Addison- Wesley Longman, the US educational publisher, which has been particularly strong in maths and sciences.
Suggestions in the City that the acquisition was aimed at shoring up Pearson's defences against a possible hostile bid were rejected by the company. A senior insider said: "This is no poison pill, but a straight commercial deal that makes sense."
The market marked the shares down, as hopes of an imminent bid, perhaps from an American predator, receded. The shares, which traded earlier in the week at more than 700p, closed 7p down yesterday at 683p. One media analyst said: "Talk of a bid or a demerger may have been premature, but Pearson remains a strong candidate for restructuring, given its unusual mix of assets."
The company owns the Financial Times, half of the Economist, Madame Tussauds, 50 per cent of Lazard Brothers, the merchant bank, and significant television interests.
News Corporation sold the assets as part of a strategic restructuring of Mr Murdoch's world-wide media empire. He is expected to concentrate on television, electronic publishing and his core newspaper publishing businesses, and is believed to be selling companies to prepare for a large- scale investment in digital TV.
Separately, Mr Murdoch said at a conference in Atlanta that he intended to supplant CNN, Ted Turner's all-news network, by combatting the liberal tendency of news coverage in the US. "Our opportunity here in news is that people don't like the sort of news they're getting," Mr Murdoch said.
The two HarperCollins divisions bring Pearson a strong list of history, literature, language and arts, where AWL has been weak. "This acquisition certainly strengthens our `book bag'", Larry Jones, chief executive of AWL, said. "We will be far more effective in our sales efforts." Pearson said it would seek cost savings, believed to be in the region of 10 per cent, after a merger of the two businesses. Together, the divisions had pro forma annual sales of $862m, and operating profits of $140m.
Steven Winram, analyst at BZW, said the acquisition would provide Pearson with higher volumes in the US educational market, where AWL had a difficult trading year.
A Maths programme developed for the Californian schools market proved unpopular with teachers, and rivals managed to outsell Addison-Wesley.Reuse content