Pearson Plc moved closer to an exit from business publishing as it announced plans to dispose of its stake in the 172-year-old Economist magazine, just days after the sale of The Financial Times newspaper.
Discussions with The Economist Group’s board and trustees are under way about a disposal of its 50 percent holding in the unit, London-based Pearson said on Saturday. The Economist was among assets that were excluded from a $1.3 billion agreement to divest the FT Group to Japan’s Nikkei Inc. in the same week.
Proceeds from a sale would give Pearson Chief Executive Officer John Fallon extra firepower to turn around the company’s education business. Pearson, the world’s largest education company, has recently lost testing contracts in the U.S. and its first-half sales stalled as demand for textbooks continued to shrink and fewer students enrolled in college.
“The market is telling them they have these very valuable business titles while education isn’t yielding very much returns,” according to Alex DeGroote, a media analyst at Peel Hunt LLP in London, who said he is skeptical about using the sale proceeds to invest in digital education or to repay debt.
Pearson’s 50 percent holding in The Economist Group could be valued at as much as 400 million pounds ($620 million), according to two people familiar with the matter who asked not to be identified because the discussions are private.
Current family shareholders, including the Cadburys, Rothschilds and Schroders, are in talks to buy the stake, people familiar with the matter said.
Another investor -- Exor SpA, the investment vehicle for the Agnelli family that founded Italian carmaker Fiat -- said in a release that it’s in talks to increase its investment in the Economist Group. Exor, which has a stake of about 4.7 percent, plans to keep the holding to a minority, it said.
Also under The Economist Group are the Economist Intelligence Unit and titles such as CQ Roll Call. The unit reported 60 million pounds in operating profit on sales of 328 million pounds in the 12 months through March. The Economist, which has been edited in London since 1843 and is read by many political and business leaders, has a circulation of 1.6 million.
No decision on the sale has been made, and Pearson has also held talks with other potential buyers, the people familiar with the matter said.
The family shareholders of The Economist Group own their stakes through Class A shares, while Pearson holds Class B shares. A transfer of the stock must be approved by the Economist Group’s four trustees.
Penguin Random House
Pearson’s 47 percent stake in book-publishing venture Penguin Random House may also be up for sale. Beginning in October, Pearson has the option to divest the holding under an agreement with Germany’s Bertelsmann SE, which owns the remainder. People familiar with the matter said last year that Bertelsmann intended to buy all or part of the stake as soon as this year.
Shares of Pearson fell 1 percent to 1,207 pence at 8:08 a.m. in London, valuing the company at 9.9 billion pounds.
While Pearson gets almost all its profit from education, the company has struggled the past two years with job cuts and a reorganization to boost investment in digital services and emerging markets. It’s spending another 30 million pounds this year in part to expand online products.
John Micklethwait, current editor-in-chief of Bloomberg and former editor-in-chief of The Economist, still owns shares in The Economist Group and was not involved in the reporting and editing of this story.