Pearson Agrees to Sell Financial Times to Nikkei

Dow Jones Newswires

Pearson PLC on Thursday said it would sell FT Group, which includes the Financial Times newspaper, to Nikkei Inc. of Japan for GBP844 million ($1.32 billion). The cash sale means Pearson is jettisoning one of its flagship media assets to sharpen its focus on its key education businesses. For years, the London-based company--which generates about 60% of its sales in North America and three-quarters of its revenue from education--had rejected talk it would sell its salmon-colored, business-focused title. However, Pearson Chief Executive John Fallon said in a statement Thursday afternoon that after nearly 60 years of ownership, "we've reached an inflection point in media, driven by the explosive growth of mobile and social. In this new environment, the best way to ensure the FT's journalistic and commercial success is for it to be part of a global, digital news company." Shares in Pearson traded more than 2% higher in afternoon trading in London. The agreement doesn't include FT Group's London property at One Southwark Bridge or Pearson's 50% stake in the Economist Group but does include its joint venture with Russian business newspaper Vedomosti. The transaction is subject to a number of regulatory approvals and is expected to close during the fourth quarter of 2015, Pearson said. Pearson's long-standing former chief executive, the American-born Marjorie Scardino, evolved the company from a sprawling conglomerate that included the Madame Tussauds wax museums and a stake in a television production company into an education specialist during a 16-year tenure through 2012. She was clear throughout that she would reject any proposal to separate Pearson and the Financial Times, which she once said would be sold "over my dead body." Mr. Fallon--a company veteran who led Pearson's education businesses outside North America before succeeding Mrs. Scardino at the start of 2013--also has repeatedly called the news group and its growing readership integral to the company's commercial and strategic vision. Those past statements of intent from Pearson countered calls for the London-based company to sell the units and use the capital to advance its higher-growth education businesses, either by plowing investment into new digital teaching technologies or deals in emerging economies. The Financial Times increased its circulation in 2014 by 10% year-over-year to almost 720,000 across print and online. Digital subscriptions rose 21% to almost 504,000--70% of the FT's total paying audience. Although Mr. Fallon had openly questioned the future of Pearson's stake in the Economist Group, which publishes the Economist magazine, the company seems committed to keeping it for now. The publisher's 2014 performance was hurt by currency effects, but the magazine's circulation remains robust at 1.6 million, Pearson said in February. "There are more logical owners than Pearson for what is an attractive, trophy asset," said Mostyn Goodwin, an analyst at consulting firm OC&C Strategy Consultants, before the announcement of the deal with Nikkei. "The buyer will have acquired a powerful global brand with cut-through among both readers and advertisers--the killer combination in the current media landscape." For Pearson, the sale of the FT comes after it has completed a two-year restructuring plan, which has hit earnings but saved the business hundreds of millions of dollars. In February, Pearson reported a fall in net profit for 2014 to GBP470 million, compared with GBP538 million the year before. Adjusted operating profit, before restructuring charges, fell 5% to GBP720 million, in line with company forecasts. Sales fell 4% to GBP4.87 billion, in line with market forecasts, with North America revenues down 3%. At the time it said growing digital circulation offset declines in print content and advertising, without giving figures. It also forecast group sales this year, excluding acquisitions and disposals, to increase for the first time in five years amid a recovery of its core education markets, including the U.S. Its business there centers on teaching, testing and digital-learning technologies, including providing textbooks and software for schools and higher education. However, Liberum analyst Ian Whittaker said the company's education operations remain "deeply challenged." Pearson is set to report first-half earnings on Friday. As well as focusing on its U.S. operations, Pearson has trained its gaze elsewhere overseas. Amid flagging Western education markets, the company is bolstering its global presence with English-language schools, private higher-education campuses and digital classroom programs across high-growth international economies such as China, Brazil and South Africa, where learning among the middle class is booming. The company's changes in recent years follow a wave of digitization for its businesses. The company's core services are increasingly online. Ten years ago, two-thirds of what Pearson made and sold was in print, but now the same proportion of its business is a digital service, such as running English-language courses online. In 2014, 11 million students in the U.S. took the company's tests on cellphones, tablets or laptops. News Corp, which owns Dow Jones & Co., publisher of The Wall Street Journal, competes with Pearson's book publishing, business-news and education divisions. News Corp also competes with Nikkei.

Continue Reading Below