Pearson CFO Freestone Won’t Rule Out Sale of Financial Times
Pearson Plc (PSON) wouldn’t rule out a sale of the Financial Times as Chief Financial Officer Robin Freestone told investors that the company may eventually re-examine its ownership of the newspaper.
“We look at the ownership of that and say, ‘Are we the best owners for it?’” Freestone said yesterday at a conference in Barcelona organized by Morgan Stanley. “So far the answer is yes. That could change.”
Pearson is emphasizing its education business as new Chief Executive Officer John Fallon prepares to take the reins from Marjorie Scardino, who retires in January. The company has decided to consider offers for the newspaper this year, people with knowledge of the situation told Bloomberg News this month. Charles Goldsmith, a spokesman for Pearson in London, said the company “denies categorically” that it has made such a decision.
The more than 120-year-old newspaper that was first printed on pink paper in 1893 and was bought by Pearson in 1957 employs more than 600 journalists and has combined paid print and digital circulation of about 600,000. Fallon last month called it a “highly valued and very valuable part of Pearson.”
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), a person familiar with the matter has said. The paper is worth at least $1 billion, two other people have said.
The company has been working to increase digital subscriptions to compensate for a decline in print sales. The FT Group reported sales that rose 6.4 percent to 216 million pounds in the first half. Adjusted operating profit grew 4.8 percent to 22 million pounds. It accounts for about 8 percent of revenue and 12 percent of profit.
“It’s a very highly valued asset,” Freestone said yesterday. The newspaper is “certainly not making the losses of some of its compatriots in the U.K.”
Pearson shares slipped 0.6 percent to 1,203 pence at 11:13 a.m. in London trading.
The company may also ultimately re-evaluate its minority holding in a venture being set up with Bertelsmann SE (BTG) to combine the German media group’s Random House with Pearson’s Penguin publisher, Freestone said.
“We would hope to hold 47 percent for a very long time,” Freestone said. “In the event that we decide it’s the right thing to do, we will explore other options.”
No breakup fee is included in the Penguin-Random House agreement, and the partners are prohibited from selling their holdings for three years, the companies said last month when they announced the deal. After five years, either company can ask to carry out an initial public offering of the venture.
Consumer titles are increasingly becoming digital and Pearson sees e-book distributors consolidating into a smaller market, Freestone said. That makes the partnership with Bertelsmann, which would create by far the largest book publisher in the U.K. and U.S., particularly attractive.
The venture between 77-year-old Penguin and 87-year-old Random House will control about 25 percent of the industry, according to Bertelsmann CEO Thomas Rabe. The two companies controlled a combined 29 percent of U.S. publishing sales and 26 percent of the U.K. market, according to this year’s sales data through Oct. 6 compiled by Nielsen BookScan.
“Books are the horses and bayonets of the industry,” Freestone said. “We’re not trying to sell horses and bayonets. We’re trying to sell nuclear submarines and aircraft carriers.”
Freestone said text books sold by its education business will evolve into software-as-a-service that can show teachers the most effective way to teach a subject.
To contact the reporter on this story: Amy Thomson in Barcelona at firstname.lastname@example.org