Publisher Pearson PLC (PSON.LN) said Tuesday that the Libyan Investment Authority's 3.27% holding in the company had been frozen and that it won't pay a dividend on the stake until further notice, as the unrest in Libya continued.

Following legal advice, the company said Tuesday the stake had been "effectively frozen" based on a review of United Nations Security Council sanctions and the Libya Financial Sanctions Order in the U.K.

"As a result, Pearson has today informed the LIA and its nominees that Pearson will not register any transfer or pay any dividend in respect of the shares until further notice," the company said in a brief statement.

Pearson on Monday declared a final dividend of 25.7 pence a share for 2010, which would have resulted in the Libyan sovereign wealth fund receiving a payout of GBP6.8 million, based on Dow Jones Newswires calculations. LIA's 3.27% stake in Pearson is worth around GBP278.7 million, based on the company's 1049 pence share price Tuesday.

"The LIA is a Libyan state asset, and it is to be hoped that in due course these assets can be redeployed to the benefit of Libya and its people," a Pearson spokesman said.

Chief Executive Marjorie Scardino on Monday said Pearson was "uncomfortable" about the LIA's holding as tensions in Libya escalated.

On Sunday, the U.K. froze the assets of Libyan leader Col. Moammar Gadhafi and his family, a day after the United Nations imposed sanctions on Libya.

Pearson, which has extensive education and publishing operations including the Financial Times newspaper, originally believed the LIA's stake to be 3%. Pearson said Tuesday that it has "reasonable cause" to believe that the LIA may have acquired an additional 2.1 million shares since its original investment, which was disclosed on June 7, 2010. The additional shares result in a total interest of 26.6 million shares, or 3.27% of the company's issued share capital.

As a result of the updated shareholding details, the LIA is Pearson's third biggest shareholder, overtaking the ABC Islamic Bank E.C. with a 3.1% stake, according to FactSet.

Pearson's two biggest shareholders are Blackrock Investment Management (UK) Ltd. with a 4.76% stake and Legal & General Investment Management Ltd. with a 3.97% holding.

The LIA, established in 2006, is a vehicle for Libya to diversify its global investments. Pearson is among several European companies in which LIA holds a stake; others include Italy's Juventus Football Club SpA (JUVE.MI); defense contractor Finmeccanica SpA (FNC.MI), and UniCredit SpA (UCG.MI), Italy's largest bank.

At 1350 GMT, Pearson shares were down 1 pence, or 0.1%, at 1049 pence, valuing the company at GBP8.40 billion, in a slightly lower London market.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com
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