The giant education company Pearson is selling its U.S. curriculum and instructional materials business to a California-based investment firm, in a much-anticipated deal that amounts to a potential re-ordering of an important corner of the education market.
Now they have their answer. The K-12 courseware business – which is focused on providing textbooks and instructional resources in the United States – will be sold to Nexus Capital Management LP for $250 million.
The buyer, based in Los Angeles, describes itself as an alternative asset investment management firm. Its capital comes from U.S. and international institutions, and it works across a variety of sectors, not just in education but in distribution and logistics, food and retail, and other areas, according to its website.
It’s not immediately clear what Nexus Capital Management’s plans are for Pearson’s education programs. A spokeswoman for Pearson, Laura Howe, referred those questions to the investment firm, which has not yet responded to a request for comment. But the way the deal is structured, Pearson retains the ability to claim 20 percent of future cash flows and 20 percent of net proceeds, in the event that Nexus sells the business in the future.
Pearson will keep working in other areas of the U.S. education market, through its sales of assessments and its work in virtual schools, advanced placement, and career and tech education, it said.
To date, Pearson has remained active in the U.S. curriculum market, even as it has worked toward a sale. For instance, it was one of many education companies that bid to get its materials accepted through the lucrative materials-adoption process in Florida. (That process has been put on hold, pending a state-ordered review of the state’s academic standards.)
Pearson officials have previously said that their U.S. instructional materials’ business was producing lower profits than other areas of the business, and that the company was determined to streamline its operations.
“School publishing in America has been an important part of Pearson for many years, and what it does matters to teachers and students across the country,” CEO John Fallon said of the sale. “We’re pleased to have found new owners who are committed to its future, and we wish it every success. The sale frees us up to focus on the digital-first strategy that will drive our future growth.”
The London-based company will be in a better position to serve U.S. schools and “help their students to be successful in their studies and future careers,” added Fallon.
Pearson described the sale as part of a “simplification” effort across the company.
The deal with Nexus Capital Management is structured as an initial cash payment for $25 million, with an unconditional vendor note of $225 million, to be repaid over three to seven years, Pearson said in a statement.
After the repayment of the vendor note, Pearson will be entitled to receive 20 percent of all future cash flows to equity holders. It will also receive 20 percent of net proceeds, in the event the business is sold by Nexus Capital Management, a Pearson spokeswoman said.
That aspect of the deal is designed to give Pearson the ability to “capture future upside in the U.S. K-12 courseware adoptions market over the coming years,” the company said.