Sanoma completes the acquisition of Pearson’s local K12 learning content business in Italy and its exam preparation business in Germany, and consequently updates its Outlook for 2022

Sanoma Corporation, Inside information, 31 August 2022 at 18:00 EET

Sanoma completes the acquisition of Pearson’s local K12 learning content business in Italy and its exam preparation business in Germany, and consequently updates its Outlook for 2022

Sanoma has completed the acquisition of Pearson’s local K12 learning content business in Italy (‘Pearson Italy’) and its exam preparation business in Germany (‘Pearson Germany’) that was announced on 7 June 2022. The acquired businesses will become part of Sanoma Learning as of 31 August 2022, and due to the consolidation for September−December 2022, Sanoma updates its Outlook for 2022. The acquisition increases the Group’s net sales, while having − in-line with the typical seasonality of the learning business − a slightly negative impact on operational EBIT margin excl. PPA due to the low profitability of the fourth quarter. Without the acquisition the outlook would be unchanged.

New Outlook for 2022 updated for the acquisition of Pearson Italy and Germany:

In 2022, Sanoma expects that the Group’s reported net sales will be EUR 1.30‒1.35 billion (2021: 1.25). The Group’s operational EBIT margin excl. PPA is expected to be around 15% (2021: 15.8%).

Regarding the operating environment Sanoma expects that (unchanged):

• The continuing coronavirus pandemic will not have a significant impact on its businesses.
• The advertising market in Finland will be stable.

Previous Outlook:

In 2022, Sanoma expects that the Group’s reported net sales will be EUR 1.25‒1.30 billion (2021: 1.25). The Group’s operational EBIT margin excl. PPA is expected to be between 15−16% (2021: 15.8%).

“I am very pleased to announce the closing of our acquisition of Pearson Italy and Germany. The acquisition has a perfect fit with our strategy to grow the K12 learning business also through M&A and it grows the share of Learning to over 70% of Sanoma’s earnings (operational EBIT excl. PPA). It also marks Sanoma Learning’s entry into Italy, one of the largest K12 learning services markets in Europe. 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, allowing us to invest approx. EUR 10 million in developing digital platforms for that important segment in the next few years,” says Susan Duinhoven, President and CEO of Sanoma. “The closing of the acquisition happens towards the end of the learning high season, and is estimated to contribute modestly positively, by EUR 4‒5 million, to our 2022 operational EBIT excl. PPA. I warmly welcome our new colleagues in Italy and Germany to Sanoma, and we are looking forward to working closely with the teams on a successful integration. This acquisition strengthens Sanoma Learning’s position as the leading K12 learning service provider in Europe.”

Adjusted quarterly key figures of the acquired businesses

(pro forma, preliminarily adjusted for IFRS and Sanoma accounting principles, unaudited)

The acquired business and financials in brief

Pearson Italy is the third largest provider of K12 learning materials in the fragmented Italian market. Secondary education represents approx. 80% of its 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. The acquired local K12 learning materials will be rebranded to Sanoma during the coming years. Sanoma will continue to distribute Pearson’s English language teaching materials in Italy.

The acquisition also includes Pearson’s small exam preparation business in Germany, which will continue to operate under the Stark brand.

Preliminary assessment concludes that the value of the acquired assets on the seller’s balance sheet was approx. EUR 161 million at the end of July 2022, of which intangible assets represented approx. EUR 41 million. Based on this, the acquisition would result to an annual purchase price allocation (PPA) amortisation of approx. EUR 5 million.

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 shared support functions and procurement benefits.

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 within 18−24 months of closing. Approx. EUR 3−4 million of these costs are expected to occur during 2022.

Purchase price and financing of the transaction

The cash and debt free enterprise value of the acquired businesses is EUR 190 million, and it was paid in cash at closing. Sanoma has financed the acquisition with a EUR 250 million 4-year term loan facility with Nordea Bank Abp, OP Corporate Bank plc and Skandinaviska Enskilda Banken AB (publ). The remaining part of the term loan will mainly be used for an early repayment of an EUR 50 million term loan due in February 2023.

Sanoma will book approx. EUR 6 million of transaction costs as IACs in Sanoma Learning’s Q3 2022 result.

Additional information

Investors:         Kaisa Uurasmaa, Head of Investor Relations and Sustainability, Sanoma Corporation, tel. +358 40 560 5601

Media:           Christel Lammertink, Communications Director, Sanoma Learning, tel.

Sanoma

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