Sanoma Corporation, Inside Information, 7 June 2022 at 9:00 EET
Sanoma acquires Pearson’s local K12 learning content business in Italy and announces the Group’s strategic growth ambition for 2030
Sanoma has signed an agreement to acquire Pearson’s local K12 learning content business in Italy (‘Pearson Italy’) and its small exam preparation business in Germany (‘Pearson Germany’). The acquisition has a perfect fit with Sanoma’s strategy to grow its K12 learning business through M&A, and it marks Sanoma’s entry to Italy, one of the largest K12 learning services markets in Europe. Net sales of the acquired businesses were EUR 117 million and adjusted EBITDA was EUR 30 million in 2021 (pro forma). The agreed enterprise value is EUR 190 million, corresponding to a multiple of 6.4x (EV / Pro forma adjusted EBITDA 2021). Sanoma plans to invest approx. EUR 10 million in the development of digital learning platforms for secondary education over three years following the closing of the acquisition. The investments will substantially bolster Sanoma Learning’s digital offering for secondary education not only in Italy, but also in its other operating countries. Sanoma also announces its strategic growth ambition to increase the Group net sales to over EUR 2 billion by 2030, with at least 75% coming from the learning business.
“I am very pleased to announce the acquisition of Pearson’s local learning content business in Italy and the small exam preparation business in Germany. Pearson Italy is one of the leading providers of learning materials for secondary education in the country. We see great potential in further digitalisation in Italy with our solid experience from highly digitalised countries and our digital platforms developed over the past 10+ years. Pearson Italy will bring us sizable increase in the scale of secondary education, improving the leverage of our investments in developing digital platforms for that particular segment. I am also delighted that we will have the opportunity to work together with the skilled and experienced management teams and employees in these two countries,” says Susan Duinhoven, President and CEO of Sanoma. “Pearson Germany brings a small and interesting addition to our niche services in the German education market. The acquisition strengthens Sanoma Learning’s position as a leading K12 learning service provider in Europe contributing around 70% of Sanoma’s earnings (operational EBIT excl. PPA) and adding to our cash flow generation,” she continues.
Adjusted key figures of the acquired businesses
(pro forma, preliminarily adjusted for IFRS and Sanoma accounting principles, unaudited)
|EUR million||FY 2021||FY 2020|
|Net sales, total||117||113|
|Operational EBIT excl. PPA||18||17|
|Cash flow from operations||14||13|
The acquired businesses and financials in brief
Pearson is the third largest provider of K12 learning materials in the fragmented Italian market. Net sales of the acquired Italian business were EUR 104 million in 2021, incl. net sales of the English Language Teaching (ELT) material distribution in Italy. Lower and upper secondary education represent approx. 80% of Pearson Italy’s net sales, and it has a market leading position in certain subjects, including philosophy and literature. Under its strong local brands, Pearson Italy offers schools, teachers and students recognised and reputable high-quality learning materials. Printed content is typically closely supported by digital offering. In Italy, the acquired Pearson’s local K12 learning materials will be rebranded to Sanoma during coming years, while the acquired German business will continue to operate under the Stark brand. Pearson Italy will continue to distribute Pearson’s ELT materials in Italy after the closing of the acquisition.
Italy is one of the largest K12 education markets in Europe with 7 million students in primary, secondary and vocational education, and a stable annual spend in K12 learning materials of around EUR 750 million. Use of digital and hybrid learning materials in Italy is at an early stage with currently 35% of secondary students using hybrid materials1.
The acquisition also includes Pearson’s small exam preparation business in Germany with net sales of EUR 13 million in 2021.
The seller of the businesses is Pearson Plc, listed in London stock exchange. The value of the acquired net assets on the seller’s balance sheet was approx. EUR 125 million at the end of December 2021.
The acquired businesses have 251 employees, of which 161 in Italy and 90 in Germany. They will become employees of Sanoma Learning after the closing of the acquisition.
Sanoma estimates that the acquisition will create synergies of EUR 2−3 million (annual run-rate). The synergies are expected to be realised in full in 18−24 months after closing and mainly relate to support functions and procurement.
Sanoma estimates that the acquisition will create separation, integration and rebranding costs, to be booked as items affecting comparability (IACs), of approx. EUR 14 million during 18−24 months after closing. In addition, Sanoma is planning to invest an additional EUR 10 million in the development of digital learning platforms for secondary education over three years following the closing of the acquisition. The investments will substantially bolster Sanoma Learning’s digital offering for secondary education not only in Italy, but also in its other operating countries.
1 Source: Italian Ministry of Education
Purchase price and financing of the acquisition
The agreed cash and debt free enterprise value of the acquired business is EUR 190 million. The enterprise value represents an EV / Pro forma adjusted EBITDA 2021 multiple of 6.4x. By adding the estimated costs for separation and integration as well as the additional investments in digital development, the multiple increases to approx. 7.2x.
Sanoma will finance the acquisition with debt and has signed an underwritten 4-year term loan facility with Nordea Bank Abp, OP Corporate Bank plc and Skandinaviska Enskilda Banken AB (publ).
In Italy, the transaction’s status under the Foreign Direct Investments regime, so called Golden Power, will be discussed with the relevant authority. The transaction is expected to be finalised during Q3 2022. After closing, the acquired businesses will be reported as part of Sanoma Learning SBU. Sanoma will book approx. EUR 3 million of transaction costs as IACs in Sanoma Learning’s Q2 2022 result. The remaining transaction costs of approx. EUR 5 million will be booked at closing.
Sanoma announces its strategic growth ambition for 2030
The acquired Pearson business has a perfect fit with Sanoma’s strategy to grow its K12 learning business by expanding to new markets through M&A. Sanoma reinforces its growth strategy by announcing a strategic growth ambition to increase the Group net sales to over EUR 2 billion by 2030, with at least 75% coming from the learning business. Sanoma considers the following levers being central in achieving its 2030 ambition:
- Organic growth in-line with Sanoma Learning’s long-term target of 2−5% p.a. Sanoma Learning aims to grow its market share in its existing markets and increase sales per student e.g. by providing additional services.
- Growth through acquisitions while paying an increasing dividend. The learning and media businesses generate a solid positive cash flow enabling Sanoma to expand its debt capacity for further M&A, while keeping its leverage (net debt / adjusted EBITDA) within the long-term target of below 3.0. In addition, equity could be considered for funding further growth, if it creates value for all shareholders.
Sanoma’s long-term financial targets, dividend policy and outlook for 2022 remain unchanged and are available at sanoma.com/investors.
News conference for analysts and investors
Sanoma will host an analyst and press conference about the transaction for analysts and investors in English today, 7 June at 11:00 EET (10:00 CET) at Sanomatalo, Flik Studio Eliel, 1st floor, Töölönlahdenkatu 2, Helsinki. President and CEO Susan Duinhoven will present the transaction, followed by a Q&A session together with CFO Alex Green.
The conference can also be followed as a webcast at https://sanoma.videosync.fi/analyst_meeting_june22.
Questions for the management can be placed through the webcast chat function or by phone. To ask questions by phone, please join in 5-10 minutes prior to the starting time by dialling one of the following numbers:
Finland: +358 9 7479 0572
Sweden: +46 8 5664 2754
United Kingdom: +44 330 165 3641
United States: +1 646 828 8082
Participant code for the call is 646089.
The presentation material will be available at www.sanoma.com/investors when the webcast starts, and an on-demand replay of the webcast shortly after the end of the live event.
Media may interview the President and CEO Susan Duinhoven about the transaction after the conference. To book an interview, please contact Communications Director Marcus Wiklund, mobile +358 400 603 147, email email@example.com.
Kaisa Uurasmaa, Head of Investor Relations and Sustainability, Sanoma Corporation tel. +358 40 560 5601
Sanoma is an innovative and agile learning and media company impacting the lives of millions of people every day. Our Sustainability Strategy is designed to maximise our positive ‘brainprint’ on society and to minimise our environmental footprint. We are committed to the UN Sustainable Development Goals and signatory to the UN Global Compact.
Our learning products and services enable teachers to develop the talents of every child to reach their full potential. We offer printed and digital learning content as well as digital learning and teaching platforms for primary, secondary and vocational education, and want to grow our business.
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Today, we operate in eleven European countries and employ more than 5,000 professionals. In 2021, our net sales amounted to approx. 1.25bn€ and our operational EBIT margin excl. PPA was 15.8%. Sanoma shares are listed on Nasdaq Helsinki. More information is available at sanoma.com.