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Pearson's $2.5B school deal
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July 31, 2000: 7:39 a.m. ET
UK firm to buy NCS, boost presence in U.S. school system
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LONDON (CNNfn) - U.K. media firm Pearson PLC said Monday it plans to buy U.S. education services company National Computer Systems Inc. for $2.5 billion to build a powerhouse in educational content, online learning and assessment.
From NCS, Pearson will gain academic testing services and equipment as well as education management software. The London-based firm will pay $73 per share for NCS (NLCS: Research, Estimates), a premium of more than 25 percent above the U.S. company's closing price on Nasdaq Friday.
Pearson already reaps almost 50 percent of its revenue from its education business, which includes imprints such as Simon & Schuster's textbook unit and Longman, one of Europe's biggest educational publishers. NCS collects and interprets student assessment tests in the United States, and provides management software to schools. 
London-based Pearson will finance the deal by offering new stock to its own shareholders on the basis of three new shares for every 11 already held, creating 170 million new Pearson shares at £10 per share.
Pearson (PSON) shares fell 6 percent to 1,885 pence on the prospect of the rights issue. In a statement, chief executive Marjorie Scardino said the firm's recent acquisitions had been funded by proceeds from unit sales as well as taking on debt. She said the rights issue would strengthen the balance sheet for the future.
The U.K. company said the NCS acquisition would deliver $50 million of annual cost savings by the end of 2002 and would enhance Pearson's earnings next year.
Unveiling earnings simultaneously, Pearson also said its operating profits in the six months ended in June rose 32 percent to £148 million ($222 million) before goodwill, exceptional items and expenses for Internet enterprises.
The company said revenue rose 18 percent to £1.55 billion, boosted by a 16 percent rise in education sales to £636 million.
Pearson is reinventing itself from a sprawling conglomerate with interests from fine china to investment banking. Its European television assets have been merged with Germany's Bertelsmann into RTL Group PLC, which was listed in London last week. Pearson also owns the Financial Times newspaper, Penguin Books and Spanish publishing outfit Recoletos. 
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