Financial Times publisher Pearson Group is expanding its presence in China with the acquisition of educational exam preparation services provider, Global Education and Technology.
Global Education, a NASDAQ listed company, is being bought for a net $155m in cash. Pearson is offering $11.006 per American Depositary Share of Global Education, which values the target company at $294m but, the net acquisition cost to Pearson works out a lot lower, thanks to Global Education's cash pile of around $139m.
Global Education is a leading provider of test preparation services in China for students who are working towards internationally-recognised English language assessments. Pearson estimates that around 500,000 Chinese students take these tests each year, a four-fold increase over the past five years which has produced rapid growth in spending on related teaching and preparation services.
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Pearson expects the acquired company to generate revenues of around $65m in 2011. The acquisition should be broadly earnings neutral in 2012, its first full year, including integration costs. From 2013, Pearson expects the acquisition to enhance adjusted earnings per share and to generate a cash return on invested capital above Pearson's weighted average cost of capital.
"Through organic investment and complementary acquisitions, we're learning a lot about the very significant growth opportunities we see in China and about the value of combining our content and technology with high-quality school networks," said John Fallon, chief executive of Pearson's International education business.
The acquisition "significantly extends our scale, geographic breadth and range of education in the fastest-growing English language teaching market in the world," Fallon added.
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