Pearson and Bertelsmann Agree Consumer Publishing Partnership

LONDON--International media and education company Pearson PLC (PSON.LN), and Bertelsmann Monday agreed to create a publishing organization by combining publishing brands Penguin and Random House.

MAIN FACTS:

-Under the terms of the agreement, Penguin and Random House will combine their businesses in a newly-created joint venture named Penguin Random House.

-Bertelsmann will own 53% of the joint venture and Pearson will own 47%. The joint venture will exclude Bertelsmann's trade publishing business in Germany and Pearson will retain rights to use the Penguin brand in education markets worldwide.

-Bertelsmann will nominate five directors to the Board of Penguin Random House and Pearson will nominate four. John Makinson, currently chairman and chief executive of Penguin, will be chairman of Penguin Random House and Markus Dohle, currently chief executive of Random House, will be its chief executive.

-The combination is subject to customary regulatory and other approvals, including merger control clearances, and is expected to complete in the second half of 2013.

-Under the terms of the agreement, neither Pearson nor Bertelsmann may sell any part of their shareholding in Penguin Random House for three years.

-To protect Pearson's interests as a minority shareholder, if Bertelsmann declines a Pearson offer to sell its entire shareholding, Pearson may require a recapitalization by which Penguin Random House raises debt of up to 3.5x Ebitda, with a dividend distributed to shareholders in line with their ownership.

-In addition, from five years after completion, either partner may require an IPO of Penguin Random House.

-Shares closed Friday at 1221 pence valuing the company at GBP9.98 billion.

-Write to Razak Musah Baba at [e-mail]

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