Wednesday 18 December 2019 8:27 am

Pearson CEO to depart as it sells $675m stake in Penguin Random House

Pearson’s chief executive today announced that he plans to step down in 2020, triggering a search for a successor.

John Fallon said he would retire from the role as the education publishing business sold its final stake in Penguin Random House today.

Read more: Pearson bags Home Office contract for English language tests

He will not leave the education publishing business until chair Sidney Taurel finds a replacement, with the business looking at both external and internal candidates.

“There’s a lot still to do but we’re making good progress in navigating Pearson through a period of huge change,” Fallon said.

He pointed to Pearson’s transition from print into digital, and said 75 per cent of the firm is now growing – outside of its struggling US Higher Education Courseware division.

“We’re now at the stage where it’s time to transition to a new leader, who can bring a fresh perspective. As the Board works on my succession, I will continue to be completely committed to leading the company through this major transformation.”

“In some very challenging markets, John has worked tirelessly leading Pearson through a period of significant change,” Taurel added.

“Under John’s leadership Pearson has become a simpler, more digital focused business underpinned by a stronger balance sheet and better positioned to deliver a sustainable and healthy future. The board and I are grateful for John’s significant contribution.”

Analysts said it was time for Fallon to leave Pearson. Shares have halved in value since he took the helm in 2013. They peaked at 1,493p in January 2015 but have sunk to around the 652p mark since.

“The shift to digital needs some new blood,” chief market analyst Neil Wilson said.

“I can’t see anyone particularly missing Mr Fallon.”

Broker Liberum said his departure may lead to a period of renewal for the publisher after it issued a profit warning for its US higher education arm earlier this year.

“We would make the point that the latest profit warning impacted faith in management’s ability to predict trends or give guidance for the business, so this may be the start of a rebuilding and transformation process for Pearson,” Liberum’s note read.

The announcement of Fallon’s departure next year came as Pearson agreed to sell its 25 per cent stake in publisher Penguin Random House to Bertelsmann to generate $675m (£530m) of proceeds.

It will return £350m to shareholders via a share buyback once the disposal clears in the first half of 2020.

Pearson’s share price rose 4.9 per cent to 675.4p to lead the FTSE 100 as traders welcomed the news.

It said its stake in the publisher – formed from a merger in 2013 – will have generated almost £2bn including in net disposal proceeds.

Read more: Weak print sales are still hurting Pearson’s bottom line

“With the sale of our remaining stake to our partners, Bertelsmann, we know the company is in good hands – and we wish our colleagues and authors every future success,” Fallon said.

“This enables Pearson now to be completely focused on building the world’s leading digital learning company, linking education to employability and skills, and reaching more learners around the world to support them through a lifetime of learning.”