Private Equity is back - Pearson sells Interactive Data stake for $2bn to Silver Lake

Pearson (LON:PSON) is to sell its 61% stake in Interactive Data Corporation (NYSE:IDC) for $2bn

In a rare sign of life for the large-cap private equity community, Pearson (LON:PSON) announced that it is to sell its 61% stake in Interactive Data Corporation in a deal worth $2bn before tax. Interactive Data Corporation (NYSE: IDC), which provides financial market data, analytics and solutions, has agreed to be acquired by investment funds managed by Silver Lake and Warburg Pincus. The transaction has a total value of $3.4bn.

Interactive Data Corporation is a leading global provider of financial market data, analytics and related solutions to financial institutions, active traders and individual investors. Interactive Data, headquartered in Bedford, Mass.,  has approximately 2,400 employees in offices located throughout North America, Europe, Asia and Australia.The Company's businesses supply real-time market data, time-sensitive pricing, evaluations and reference data for millions of securities traded around the world. According to the Company, many of the world's best-known financial service and software companies subscribe to the Company's services in support of their trading, analysis, portfolio management and valuation activities.

The $33.86 per share cash deal represents a premium of about 32.9% over the closing share price on January 14, the last trading day before Interactive Data announced its board was reviewing strategic alternatives.  In 2009, Interactive Data contributed £484m in sales and £148m in operating profit to Pearson. After tax and minority interests, its contribution to the group's adjusted earnings was £55m or 6.8p per share. Pearson says it plans to use the proceeds to accelerate expansion, including bolt-on acquisitions, with a particular focus on adding complementary technology and services.

In other news, Pearson announced last week that all parts of the company have made a good start to 2010. The group is trading in line with its expectations, and continues to expect another year of underlying profit growth.
Pearson generated £1.08bn in revenues in the first quarter, an increase of 7% in headline terms and 12% at constant currencies. Marjorie Scardino, CEO, said:

'The first quarter never tells us a great deal about the full-year, but our direction of travel is encouraging. Our leadership in global education and the rapid growth of our digital and services businesses across Pearson continue to propel strong trading. We've seen some improvement in markets that were tough for us through the recession, but we remain cautious about the economic outlook. Still, we're confident that we can build on our consistent record of profit growth this year".

'In Education, our strong financial and competitive performance has continued into the early part of 2010. In North America, our Higher Education and Assessment and Information businesses are showing good growth, benefiting from our focus on student performance, our leadership in learning technologies and new contract wins.

'At the FT Group, we are benefiting from our strategy of providing high-quality, premium information and analysis, delivered more and more through digital channels and subscription services. At FT Publishing, strong demand for subscriptions to the Financial Times in print and online, an increase in new sales at Mergermarket and a return to growth in advertising revenues all contributed to a good first quarter.

'Penguin has made a good start to the year, particularly in the US, the UK and at Dorling Kindersley. We expect another good competitive performance, with a compelling publishing schedule in the second half of the year. Growth in demand for eBooks also remains very strong, and Penguin is actively engaged in developing new publishing models for digital devices.'

At the end of 2009, Pearson's net debt was £1,092m, giving a net debt/EBITDA ratio of 1.1x and interest cover of 8.8x. Net debt increased during the first quarter as a result of exchange rate movements and the normal seasonal build-up of working capital ahead of our key selling periods in education.

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