Struggling education publisher Pearson offloads Penguin stake as boss John Fallon bows out

Education group Pearson unveiled a £530million deal to sell its remaining stake in book publisher Penguin Random House as it announced the retirement of chief executive John Fallon.

Pearson will end its near-50 year relationship with Penguin with the sale of its last 25 per cent holding in the group to German media group Bertelsmann – a deal valuing Penguin at around £2.8billion.

Pearson – which has also offloaded its media interests including the Financial Times Group and the Economist Group in recent years – said  Fallon will step down as boss in 2020 once a successor has been appointed.

His departure will cap more than six years in the role and comes after a difficult 12 months, with Pearson recently warning over profits.

The group is halfway through an overhaul to become a digital educational products and services company – a strategy that Fallon has overseen, and has included a raft of major asset sales, as well as job cuts. 

Fallon said: ‘There’s a lot still to do but we’re making good progress in navigating Pearson through a period of huge change.

‘We’re now a much more efficient company, able to innovate more quickly and scale globally.’

Pearson chairman Sidney Taurel said: ‘In some very challenging markets, John has worked tirelessly, leading Pearson through a period of significant change, and led its transformation from a media conglomerate to a single-focused learning company.’

Shares in Pearson rose 2 per cent after news of the stake sale.

The Penguin deal is expected to complete in the first half of next year, with the proceeds being used to buy back £350million of shares.

It sees Penguin’s valuation rise by 3 per cent since Pearson sold a 22 per cent stake in the group two years ago. 

Fallon added: ‘For almost 50 years, Pearson has been proud to play our part in the publishing and commercial success of, first, Penguin and then, more recently, Penguin Random House.’

 AJ Bell investment director Russ Mould commented: ‘The one-time publisher of the Financial Times has struggled in recent years. Its central problem being that students and educational institutions have moved away from buying expensive hard copy academic textbooks.

‘The group is inching towards a more digital future but, over his near seven-year tenure, Fallon has not been able to drive this change fast enough to prevent a series of profit warnings.

‘An apparent recovery for the business in 2018 has fizzled out and the shares are now at a little over half the level they were when Fallon took over,’ he continued. 

‘It is probably no surprise that the market isn’t shedding too many tears over Fallon’s impending retirement and news of a capital return from the proceeds of the Penguin Random House sale should please investors. Given the structural problems facing the firm, his successor faces a tricky task.’