Pearson sells Financial Times with Economist next on the block

Considering how long suitors like Bloomberg and Axel Springer have been trying to woo Pearson for its prized FT Group, it is quite incredible how quickly Nikkei nipped them all at the post.

The Japanese media giant just secured one of the largest ever single publication deals with a £844 million cash offer just weeks after first making overtures. This clearly trumped Axel Springer’s ‘best and final’ offer of £750 million made on 22nd July that included a promise of continued editorial independence for the financial daily.

Back in 2013 when John Fallon took over as CEO from Marjorie Scardino, he sent mixed messages over his company's intentions for the FT. On one hand he said, “ [the FT] is a "highly valued and very valuable part of Pearson”, echoing Scardino who said she would sell the FT “over my dead body”. However behind the scenes Fallon was, if not courting, subtly encouraging approaches from large international media groups, including Bloomberg and Axel Springer. Onlookers wondered if there was anyone at Pearson’s top level who still had any real interest in the newspaper. One analyst was quoted as saying that Fallon had “zero emotional commitment” to the FT.

Media analysts closely following the company could see the reasoning behind this sentiment. These days it’s tough to become a leader in a field, but to stay ahead of the competition in two separate fields is almost impossible to achieve, let alone maintain. Global educational publisher or regional financial newspaper - which held the most promise for future growth? The answer was clear to FT management and to analysts - Pearson Education. Although Pearson is the world’s largest educational publisher by revenue, uncertainty in that sector has resulted in the firm being given a negative credit rating outlook by Moody’s. Challenges for the company include slowing Western markets and moves towards ‘digital renting’ rather than buying textbooks. A cash-fuelled refocus on educational assets is required and that will take precedence over new acquisitions, according to Fallon.

Indeed the war chest looks likely to be bolstered further - to over £1 billion in total - once the next non-core publishing asset gets sold. That is Pearson’s 50 per cent stake in the Economist Group, worth around £400 million. Last year, the group reported operating profits of around £60m, which came from its eponymous publication and also information providers CQ Roll Call and the Economist Intelligence Unit. Existing shareholders, including Exor, the investment vehicle of the Italian Agnelli family, have already indicated they are in negotiations with Pearson.

If the Economist Group business sale goes through, Pearson will only be left with one non-educational asset, a 47 per cent stake in book publisher Penguin Random House. Advice to would-be purchasers: move quickly.

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