What happened
Shares of Pearsons(NYSE: PSO), a U.K.-based publisher of educational materials, rose dramatically in early trading on March 11, jumping as much as 19.5% as a new day got underway on Wall Street. The big news sort of came from Apollo Global Management(NYSE: APO). Here's a quick look at what's going on here.
So what
Pearsons released an official response today outlining recent interactions with private equity shop Apollo Global. Basically, rumors of a takeover offer were revealed and the publisher decided to explain what was actually going on. The big-picture story is nothing, right now, because Pearsons has rejected Apollo's advances. However, based on what's happening, investors seem to think that Pearsons is in play, as they say on Wall Street.
Image source: Getty Images.
That's not an unreasonable assumption, given the response from Pearsons. Essentially, Apollo came to the company with an offer on Nov. 5 that was rejected as too low. On March 7, however, Apollo came back with a new offer, increasing its unsolicited bid by nearly 7%. That offer was also deemed insufficient. Given that Apollo has some experience in the publishing space and was willing to increase its original proposal, investors clearly think that there's a strong chance that a deal eventually gets done here.
Now what
Mergers and acquisitions fall directly into the special situations camp as far as investing goes. That's a space best left to aggressive types, so most investors should probably sit on the sidelines here. That said, if you own Pearsons, Apollo's offer could be seen as an indication that the publisher's value is greater than what the market had been assigning it of late. What you do with that information is a harder call, since there's no way to tell at this point if another, higher offer will be proffered.
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Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool recommends Pearson. The Motley Fool has a disclosure policy.
