Thomson to sell education group for $7.75 bln

Toronto, May 12: Thomson Corp is selling its education assets for a higher-than-expected $7.75 billion in cash, giving the electronic publisher a big cash infusion to pursue its bid for Reuters Group Plc.

Apax Partners, a London-based private equity group, and Canada's OMERS Capital Partners, will buy the business, the companies said on Friday. The price was well above the $5 billion to $6 billion expected by analysts.

''In the current environment, it would appear that the bidders on good assets out there are clearly prepared to pay prices to make sure that they win what they're bidding (for),'' said Paul Bradley, director of research at Fraser Mackenzie in Toronto.

The deal is valued at more than 15 times the unit's cash flow, according to two people involved in the auction and one source familiar with the business.

By comparison, the average cash flow multiple paid in leveraged buyouts of $500 million or more last year was around eight times cash flow, with media deals typically in the low-double digits, according to buyout industry statistics.

Apax is buying mainly text book publishing assets from Thomson, which include brands such as Wadsworth.

Nelson Canada, a provider of books and online resources for the educational market in Canada, will be majority-owned by OMERS.

Cash from the sale will be crucial as Thomson seeks to buy London-based Reuters, which provides financial data and news, in a deal that would be worth about $17.6 billion.

Thomson confirmed this week that it was in talks with Reuters. Canada's Thomson family, which owns 70 percent of Thomson right now, would own 53 percent of the combined entity, which would be called Thomson-Reuters.

Shares Rise

Thomson said it expected the sale of Thomson Learning, as the education unit is known, to close in the third quarter.

Thomson's shares closed about 3.9 percent higher at C$46.74 on the Toronto Stock Exchange, while Reuters shares rose 1.9 percent to 613 pence in London.

Thomson, whose publishing interests span law, tax and scientific research, has been beefing up its financial data business as it looks to tap into booming global markets.

It has also transformed from a books and newspaper company to an electronic publisher. The decision to sell Thomson Learning was part of this push.

''We believe these franchises are supported by healthy underlying market dynamics,'' Jackie Reses, a partner at Apax Partners, said in a statement.

Apax is one of the world's largest private equity firms, with more than $30 billion under management.

Other media investments by the firm include Danish telecoms group TDC, satellite company Intelsat and British phonebook publisher Yell Group.

OMERS Capital Partners is part of the Ontario Municipal Employees Retirement System, one of the largest pension fund investors in Canada.

The Thomson Learning auction attracted several teams of private equity bidders, including the former owners of text book publisher Houghton Mifflin, according to sources involved in the process. That group included Bain Capital, Blackstone Group and Thomas H. Lee Partners.

Other firms that expressed interest were Carlyle Group, Kohlberg Kravis Roberts & Co. and Providence Equity Partners, sources said. The Learning unit's cash stream was a key bright spot for private equity buyers, who seek steady cash flows to pay down debt borrowed to finance their deals.

Earlier this month, Anglo-Dutch publishing company Reed Elsevier agreed to sell two of its units to educational publisher Pearson Plc for $950 million.

(Additional reporting by Michael Flaherty, Michele Gershberg and Blaise Robinson) ($1=$1.11 Canadian) (Reporters and editors involved in writing and editing this report may own Reuters securities and are bound by the Reuters Code of Conduct, which restricts dealing in securities in companies a journalist is reporting on)

Reuters