Pearson selling some investments to be '100 percent' focused on education

By | July 27, 2015

Pearson is selling its stake in the Financial Times to Nikkei Inc., a leading Japanese media organization, for $1.3 billion. (Simon Dawson/Bloomberg News)

Pearson, the world’s largest education company, the one that testing critics love to hate, wants to get much, much bigger. It is selling other investments so that it can focus entirely on its education business.

The sales come at a time when the company has lost some big testing contracts in the United States and when its outlook from Moody’s, the credit-rating service, is negative. Still, Pearson is dominant in the education field. HBO’s John Oliver noted in a piece earlier this year that it is possible for American students to take Pearson-designed tests from kindergarten through at least eighth grade, use Pearson-designed curriculum and textbooks, and have teachers certified by a Pearson test. And that’s only part of its education reach.

The company is selling its stake in the Financial Times to Nikkei Inc., a leading Japanese media organization, for $1.3 billion, a move that Pearson chief executive John Fallon said was precipitated by the changing journalism business model and by Pearson’s desire to focus entirely on education, according to Financial Times. It is also in talks to sell its 50 percent stake in the Economist Group, which publishes the Economist magazine as well as the Economist Intelligence Unit and CQ Roll Call. The Financial Times said:

Selling the FT Group and the Economist Group stake would leave Pearson with nearly £1bn  [nearly $1.5 billion] in net proceeds — strengthening its balance sheet at a time when its credit rating has a negative outlook from Moody’s, due to uncertainty in the education sector.

Fallon told reporters a few days ago, according to Nieman Labs: “In terms of the businesses that we actively manage and lead on a daily basis, everything in that category will now be 100 percent related to education.”

Fallon wrote an article in the Financial Times that said in part:

The world of education is now changing profoundly, through globalisation, the emerging middle class in countries including India, China and Brazil, and the revolution of digital technology. The number of students going to university around the world is expected to triple over the next 20 years.

And that is what the future of Pearson is about: the ever-growing global demand for better education — whether that means learning real skills that lead to a career, access to better teachers and learning resources, or more affordable and effective higher education. It is a big and fragmented sector — annual global spending on education is estimated at about £3tn [$4.65 trillion]. As a business that currently makes around £5bn [$7.75 billion] in annual sales, that is a lot of space for Pearson to grow….

…Parents the world over say that the single most important goal for their children is to gain the skills that will help them forge successful careers and lives. This is the promise of education — and the future of Pearson.

Aside from the Moody’s negative outlook in 2014, which was reaffirmed in 2015, Pearson has recently lost some big testing contracts in the United States. New York dropped Pearson as its testing vendor, costing it a $44 million, five-year contract, which went to another company. Earlier this year, Pearson also lost its three-decade-old testing monopoly in Texas, and last year, it lost its contract to provide a standardized assessment system for public schools in Florida and watched a $220 million, six-year contract go to another firm.

Pearson is also the primary vendor for the Partnership for the Assessment of Readiness for College and Careers, one of two multi-state consortia charged with designing new Common Core-aligned exams with about $360 million in federal funds. In 2010, 26 states were aligned with PARCC, but now fewer than 10 are.