Silver Lake and Warburg Pincus are to buy financial data provider Interactive Data (IDC) for $3.4 billion in cash, including a $2 billion payment to majority owner Pearson which it will use to expand.
In the year's biggest leveraged buyout to date, the two private equity firms beat bidding groups that sources have told Reuters included Kohlberg Kravis Robert and CVC Capital Partners, and Bain Capital and Advent International.
A source familiar with the situation had told Reuters on Sunday that private-equity firms Warburg Pincus and Silver Lake were close to buying IDC for about $3.1 billion.
Pearson -- which owns the Financial Times, Penguin Books and the world's biggest education business -- said it would use the proceeds from the sale of its most profitable unit to accelerate its expansion through bolt-on acquisitions.
Pearson shares fell 1.6 percent by 1019 GMT (6:19 a.m. EDT) from a near nine-year high earlier after a strong trading update on Friday. The European media index <.SXMP> fell 0.7 percent.
Pearson and Interactive Data have extensive growth opportunities and ambitious expansion plans, Pearson Chief Executive Marjorie Scardino said in the statement.
We believe this transaction will give both companies greater focus and opportunity to invest more in their strong market positions, she added.
IDC -- which provides reference data, markets pricing and trading infrastructure services to customers including mutual funds, asset managers and banks -- said its new owners were committed to supporting its global expansion.
It had announced a strategic review in January and was being advised by Goldman Sachs .
Analyst Alex DeGroote of brokerage Panmure said: The key point from Pearson's point of view is that the money doesn't go back to shareholders.
Ordinarily when you do a transformational deal like this, selling 15 percent of your market cap, you'd give something back, he added.
IDC contributed 484 million pounds ($737 million) in sales and 148 million pounds in operating profit to Pearson in 2009, representing 9 percent of sales and 17 percent of profits. Its 31 percent margin was the highest of Pearson's businesses.
Pearson last week issued a trading update in which it said it was confident underlying profit would grow this year after first-quarter revenues rose 12 percent at constant currencies and all parts of the company started the year well.
It has in the last year made small and medium-sized acquisitions to expand its education businesses in India and China.
Tuesday's deal values IDC at 24 times expected 2010 earnings, according to Thomson Reuters StarMine estimates. That compares with an average trading multiple of 27 for U.S. specialty investment services, according to Reuters data.
A source familiar with the situation said on Tuesday private-equity firm Hellman & Friedman had pulled out of the Silver Lake-Warburg Pincus consortium about a week ago because they felt the price was getting too high.
Thomson Reuters , which sells investment information and news, trades at 21 times 2010 earnings. The company was named in media reports as a potential buyer early in the process, but never commented on the matter.
McGraw-Hill , owner of the Standard & Poor's ratings agency and publisher of U.S. textbooks, trades at 13 times 2010 earnings. Sources briefed on the matter told Reuters last month that McGraw-Hill was dropping out of the IDC auction.
The transaction is fully financed by a combination of equity from the buyers and debt financing from Bank of America Merrill Lynch , Barclays , Credit Suisse and UBS , Pearson said.
Credit Suisse, Barclays Capital, Morgan Stanley and UBS were financial advisers to the buyers.
The deal is expected to closed by the end of the third quarter, subject to regulatory and other approvals.
IDC shareholders will receive $33.86 per share, a premium of about 33 percent over the closing share price on January 14, the last trading day before IDC announced that its board was reviewing strategic alternatives.
Shares in IDC, which grew out of a company Pearson founded decades ago that merged with Nasdaq-listed Data Broadcasting Corp in 2000, closed at $32.99 on Monday.
(Additional reporting by Quentin Webb and Simon Meads; Editing by Hans Peters and Rupert Winchester)