Pearson sells off leisure arms for pounds 350m
Monday 19 October 1998
The long-awaited sale of the waxworks and Alton Towers leisure business will boost Pearson's resources just as market rumours are suggesting that its $4.6bn acquisition of Simon & Schuster's education and reference publishing house is running into problems.
Pearson refused to comment on either the Tussaud's sale or the Simon & Schuster deal.
Pearson has arranged to sell on parts of the Simon & Schuster business it does not want to an American investment firm Hicks, Muse Tate & Furst for $1bn.
Rumours are circulating Wall Street that Hicks, Muse is unable to go ahead with its part of the deal because its financing for the acquisition has fallen victim to turmoil in the bond markets and the global liquidity crunch. It is understood that Pearson has received reassurances from Hicks, Muse that the rumours are unfounded, and that it is ready to go ahead with the deal.
Pearson, however, has the financing in place to go ahead without Hicks, Muse and buy the entire education and reference house if need be.
Indeed, Pearson originally intended to buy the entire business on its own, but did the deal with Hicks, Muse when the latter indicated it was interested in the parts Pearson did not intend to keep long-term.
If the deal does go ahead without the American investment firm, Pearson will merely change its timetable for selling the surplus businesses when global markets have recovered.
In May, Pearson agreed to pay $4.6bn to US-based entertainment group Viacom, the US-based entertainment group, for the Simon & Schuster businesses. Under the terms of its deal with Hicks, the investment firm will pay Pearson $860m in cash, together with a distribution deal worth about $160m.
The Wall Street rumours suggest that Hicks no longer has access to the $500m of debt needed to fund the deal because of the effective collapse of the high-yield bond market.
The deal also has to be approved by US anti-trust regulators. Pearson's share price rose strongly after the announcement of the proposed acquisition.
The deal forms part of Pearson's intention to focus on media operations and get out of others such as Madame Tussaud's.
The sale of Madame Tussaud's will be structured in the form of a management buyout. Charterhouse outbid Viacom and Compass Partners International, a rival UK buyout fund. Lazard Brothers handled the deal on behalf of Pearson.
Pearson has already raised about pounds 58m from the sale of its Spanish theme park earlier in the year.
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