Pearson's Wily Dealmaker

Eyeing the Web, Scardino may have more in store

Marjorie Scardino knows when to grab an opportunity. The CEO of Pearson PLC, the British group that owns the Financial Times and Penguin Publishing Co., had long wanted to sell Pearson's 13.2% stake in the Lazard group of investment banks. She got her chance in June when Michel David-Weill, who controls Lazard, moved to combine his Paris, London, and New York operations. She asked him to buy Pearson out, and he agreed on June 24 to pay about $650 million for Pearson's stake. That was a lot more than David-Weill said he would shell out, according to a Lazard banker--but he paid up so he could move on to the bigger task of restructuring Lazard. Publicly, David-Weill says he thinks he paid a fair price.

Extricating Pearson from its tangled relationship with Lazard was a nice move by Scardino--and it caps 2 1/2 years of dealmaking that have dramatically reshaped Pearson. Since taking the helm in late 1996, the American-born exec has sold $3.2 billion worth of noncore assets and spent more than $5 billion on media and publishing acquisitions. Analysts think the big sales are over, but Scardino, 52, is keeping her options open. In a phone conversation from California, where she was visiting digital-publishing subsidiaries, Scardino said it would be a "big mistake" to stop refining Pearson's portfolio.

WEB BETS. Scardino's biggest challenge is to push Pearson into the Internet Age. In the coming months, she plans to take a hard look at how Pearson businesses can be expanded and linked through the Worldwide Web. More acquisitions could be in the works. "When you are out here in California, you realize how much is going on," she says. "You have to make bets on what will be enduring and what is complete B.S."

Scardino is clearly betting on Pearson's future as a global media player. She is spending heavily to boost the Financial Times' reach in the U.S., where circulation is now up to 80,000. The FT already owns leading business papers in Spain, Portugal, and France and is spearheading newspaper ventures in Germany and Russia. Its non-British circulation rose 37% last year, to 210,000.

The strategy includes Spanish media, too--Scardino calls it one of the world's "three most important languages." So she is strengthening ties with Telefonica, the former Spanish telecom monopoly that wants to dominate multimedia in the Hispanic world. Pearson has just agreed to supply game shows and dramas from its television-production subsidiary to Telefonica's TV stations in Spain and Latin America.

When Scardino took over, Pearson's stock was in the doldrums and analysts and potential raiders were calculating its breakup value. No more. By doing much of the breaking up herself, Scardino has kept Pearson together. Before Lazard, her biggest sale had been Tussauds Group, the wax museum and amusements concern, for $563 million in 1998.

Along with rapid-fire asset sales, Scardino has been buying. Her biggest splurge: last year's $4.6 billion acquisition of the education assets of Simon & Schuster from Viacom Inc., which has cemented Pearson's position as a major textbook publisher. She has also staked out a clearer position in television by buying All American Communications, the producer of Baywatch and game shows such as The Price Is Right.

In other moves, she has installed new management at Pearson, including several Americans in key slots. Earnings rose 19% in 1998, to $622 million, on sales of $3.8 billion, helping to boost the stock price by 65% in just under 2 1/2 years. Ad revenues and stronger textbook sales have been key sources of growth. "She has made it look easy," says Louise Barton, a media analyst at London broker Investec Henderson Crosthwaite. "She convinces just about everyone she talks to."

It is too soon to tell how all of Scardino's bets will fare: Global, multilanguage media is a tricky business. But give Scardino credit: She has turned Pearson from a target into a player.

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