Pearson Said Exploring Financial Times Sale as CEO Leaves

Pearson Said to Explore Financial Times Sale as Scardino Leaves
Copies of the Financial Times newspaper, owned by Pearson Plc, are seen on display at a newsagents in London, in this Oct. 3, 2012 file photo. Photographer: Chris Ratcliffe/Bloomberg

Pearson Plc is planning to explore a sale of the Financial Times newspaper as the company focuses on its faster-growing education business, people with knowledge of the situation said.

The company has decided to consider offers for the newspaper this year, said the people, who declined to be identified because the process is private. Pearson may initiate sale preparations ahead of the departure of Marjorie Scardino, the chief executive officer, who is stepping down in January, said one person. Pearson hasn’t hired an investment bank to advise on the sale, the people said.

During her 16-year tenure, Scardino defended her company’s ownership of the Financial Times, Britain’s flagship financial daily, for which Pearson may seek as much as 1 billion pounds ($1.6 billion), one of the people said. The paper is worth at least $1 billion, two other people said. FT Group accounts for about 8 percent of Pearson’s revenue and 12 percent of profit.

Potential bidders may include wealthy individuals from Russia, the Middle East or Asia, as well as Bloomberg LP, one of the people said. Bloomberg LP, the parent of Bloomberg News, has made an offer for the newspaper before and been turned down, another person said.

News Corp. may not bid due to regulatory concerns because it already owns the London-based Times newspaper, a person said. Thomson Reuters Corp. may also decide not to make an offer, another person said.

Fallon’s Take

Asked about the fate of the Financial Times last month, John Fallon, who is set to succeed Scardino, said that the newspaper was “highly valued and a very valuable part of Pearson.”

Charles Goldsmith, a spokesman for Pearson said the company was “not in the habit of responding to rumors, speculation or reports about our portfolio, however this particular Bloomberg story is wrong.” He declined to elaborate.

Spokesmen for Thomson Reuters and News Corp. declined to comment. A spokeswoman for Bloomberg LP also declined to comment.

FT Group owns the newspaper and a 50 percent stake in the Economist magazine. The group had earnings before interest, taxes, depreciation and amortization of 99 million pounds in 2011, and that probably will be little changed this year, according to calculations from Paul Sweeney, a media analyst with Bloomberg Industries.

Newspaper Values

Most large U.S. newspapers, including Gannett Co. Inc., which publishes USA Today, and New York Times Co. trade at around 5 times Ebitda, according to Sweeney, suggesting a value closer to 495 million pounds, or $782 million.

U.K. newspapers have proved attractive to overseas billionaires, many of whom have homes in London. In 2009, Russian businessman and former KGB spy Alexander Lebedev purchased the Evening Standard, a daily that focuses on local news, for 1 pound, and has boosted circulation by distributing the paper free. He paid the same amount for The Independent newspaper the following year.

Pearson has emphasized its education and professional businesses, which provide texts and software for students and employees, through acquisitions. The North American education unit accounted for more than half of operating income last year, growing 19 percent to 493 million pounds.

Last week, the company agreed to combine its Penguin unit with Bertelsmann SE’s Random House to create the largest book publisher in the U.K. and the U.S. The Penguin deal was indicative of the firm’s determination to focus on education, one of the people said. Over the past 12 months, Pearson has made a series of 10 acquisitions for a total of $1.2 billion in the education industry, which has proven more profitable than its journalism business.

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