Pearson sells £944m Channel 5 stake

FINANCIAL Times publisher Pearson is selling its minority stake in Channel 5 owner RTL to Germany's Bertelsmann in a £944m cash deal. Pearson, which last week issued its second profits warning in two months, said that it would book a £130m exceptional profit from the disposal of its 22% stake in RTL and would use the proceeds to help repay some of its £2.4bn debts. Pearson wants to maintain its BBB plus credit rating, and the RTL stake sale comes in the midst of a review by rating agencies Standard & Poor's and Moody's.

Bertelsmann already owns 67% of RTL, and with the Pearson stake taking that to 89%, the German media giant said it would tender for the remaining shares. Under the terms of the sale Bertelsmann will pay e44 (£27) each for Pearson's 34m shares, and does not intend to pay more for freely-floated stock. If the tender is completed successfully, RTL's short and chequered history as a listed entity will almost certainly end.

Bertelsmann's offer is a 22% premium to the average price for RTL's shares over the past three months, but is a far cry from the e170 value put on its stock when RTL was floated last July and worth £16.5bn. Since then RTL's shares have slumped, and a string of profits warnings caused by a decline in its advertising revenues took the stock as low as e14.50 in recent months. RTL shares were at e39 today, but Pearson added 27 1/2p to 784p.

RTL remains one of Europe's largest broadcasters with 23 television and 17 radio stations, as well as production units in 36 countries. It was formed last year through a merger of Pearson TV and Bertelsmann's television interests. Pearson said RTL would contribute £35m to its operating profits this year but expects the sale to add 1.5p to earnings per share in 2002.

Pearson chief executive Marjorie Scardino said the sale would allow her group to focus on managing its core businesses more effectively.