MLO Melorio

Publisher Pearson PLC (PSON.LN) said Wednesday it will buy London-based vocational training firm Melorio PLC (MLO.LN) for GBP99.3 million to boost its education business.

The bolt-on-acquisition comes two weeks after Pearson agreed to sell its 61% controlling stake in Interactive Data Corp. (IDC) to two private-equity firms, netting the group around $2 billion before tax.

Under the agreement, Melorio shareholders will receive 225 pence in cash for each share they own, a 31.2% premium to the closing share price of 171.5 pence on May 17, the last trading day before the offer period.

Pearson, which publishes the Financial Times newspaper and has extensive education-publishing operations, said Melorio will support its "strategy of building a strong position in the growing worldwide market for vocational learning."

"The transaction will bring together Melorio's delivery skills in training with Pearson's scale as the world's leading education company and its complementary strengths in publishing, technology and assessments," Pearson said in a statement.

Melorio's directors, which have been advised by Cenkos, consider the terms of the deal to be fair and reasonable, and intend unanimously to recommend shareholders accept the offer.

It looks like a sensible bolt-on acquisition, and "relatively inexpensive" given Pearson expects the deal to be earnings enhancing from next year, Royal Bank of Scotland analyst Paul Gooden said.

Gooden expects Pearson to do "a number of further acquisitions" following the IDC sale, but it's not clear whether they'll do more bolt-on-acquisitions or something "more substantial". Pearson should buy Grupo Santillana Ediciones, a Spanish and Latin American educational publisher, according to Gooden, who has a sell rating on Pearson and 865 pence target price.

A Pearson spokesman declined to comment on speculation. In its IDC sale statement on May 4, Pearson said it "intends to use the proceeds of the sale to accelerate the expansion of its businesses, including through bolt-on acquisitions, with a particular focus on adding complementary technology and services to its international, consumer and professional education businesses."

At the start of trade on the London Stock Exchange, Pearson shares were down 12 pence, or 1.2%, at 983 pence in a sharply lower market. Melorio shares were up 4 pence, or 2.1%, at 219 pence.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com

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