Company: Pearson PLC (PSO)
Companies: Pearson offers learning by providing a range of educational products and services to institutions, governments, professional associations and individual learners. The company operates in three segments, including North America, Core and Growth. The company's North America segment includes assessment and service businesses in the United States and Canada. The company's core segment includes assessments and service businesses in more mature markets, including the UK, Australia and Italy. The company's growth segment includes assessments and service businesses in emerging markets such as Brazil, China, India and South Africa. The company provides schools, colleges and universities with content, reviews and digital services, as well as vocational and vocational training for learners to improve their skills and employment prospects.Stock market value: $ 5.2 billion ($ 7.05 per share)
Activist: Cevian Capital
Advantageous ownership: 7.02%Average cost: $ 6.66 per shareActivist comment: Cevian was founded in 2002 and is an experienced European activist investor and a long-term (over 5 years) practical owner of European listed companies. Cevian's strategy is to help its companies become better and more sustainable in the long term, and to achieve their return by increasing the real long-term value of the company. Cevian is generally looking for board representatives in portfolio companies and is trying to work constructively with management without resorting to a proxy fight. Cevian's specialists are currently on the boards of ten portfolio companies in seven different countries. It has a concentrated portfolio of 10 to 15 companies with one or more of the following: (i) strong market positions and good long-term fundamentals; (ii) may face short-term challenges, cyclical headwinds, or poor performance from their peers; (iii) significant scope for improving the company's competitiveness and performance through operational, strategic, structural, financial and governance changes; and (iv) underestimated, undervalued and unfavorable for the market.
Cevian has discussed numerous operational and strategic opportunities to maximize shareholder value with the company's board and management, including, without limitation, ways to improve management.
Behind the scenes:
Pearson is a UK based learning company. This is Cevian's seventh investment in the UK. The company previously invested in: RSA (2013 to date), Vesuvius (2012 to date), Old Mutual (2008-2014), Wolseley (2010-2014), Cookson (2011-2012) and Alent (2012-2015). The British investment group is led by Lord Myners, who joined Cevian in 2011. From October 2008 to May 2010, Myners was the Secretary of Financial Services at the UK Treasury during Gordon Brown's Labor government. He was also a member of the Prime Minister's National Economic Council and now sits as a crossbencher in the House of Lords. In particular, Myners was previously Chairman of the Guardian Media Group, publisher of The Guardian and The Observer newspapers.
Cevian has been following Pearson closely for several years. They believe that the company has a collection of leading companies in attractive markets, but some of these companies still need to develop their full potential. Your analysis concludes that Pearson should outperform its competitors and deliver attractive, growing, and predictable returns. This requires first-class decisions and robust execution. This requires a CEO with a clear track record in creating shareholder value. The company's current CEO, John Fallon, announced last year that he would retire in 2020. The company is currently looking for its replacement, and you can be sure that Cevian will actively work with the board to select the new CEO and help the company realize its full potential.
Succession of CEOs is one of the most important things a board of directors does and one of the potentially most value-adding events for shareholders. It is an important lever for activists to help create shareholder value, and we expect Cevian to get involved in this process, preferably at the board level.
Ken Squire is the founder and president of 13D Monitor, an institutional research service for shareholder activism, and founder and portfolio manager of the 13D Activist Fund, a mutual fund that invests in a portfolio of 13D activist assets. Squire owns Pearson in the fund.