(Reuters) - Connect Group Plc (CNCTC.L), a newspaper distributor and parcel delivery company, said it would sell its education and care business to RM Plc (RM.L) for about 56.5 million pounds ($70.3 million) in cash.
Connect Group shares rose as much as 2.7 percent, while RM stock jumped 19.3 percent.
Connect Group, which also delivers books and stationery to schools, said RM would assume responsibility for the defined benefit pension schemes within the business, which had a balance sheet deficit of 7.9 million pounds as of Aug. 31, 2016.
Connect Group's full-year net debt is expected to fall to 92 million pounds from 142 million pounds, while the current dividend policy is expected to be continued, Liberum analysts said in a note, reiterating a "buy" rating.
The group will continue to focus on growth opportunities within news and media, and parcel freight businesses, it said in a statement.
Connect Group stock pared its early gains to trade flat at 139.47 pence as of 0910 GMT, while RM shares were up 17.7 percent at 161.69 pence.
Reporting by Sanjeeban Sarkar in Bengaluru; Editing by Gopakumar Warrier and Amrutha Gayathri