By Simon Zekaria
LONDON-- Pearson PLC on Thursday said it is in advanced talks
over the potential sale of FT Group, which includes the Financial
Times newspaper.
Although Pearson didn't say who it was in talks with and said
there was no certainty that the discussions would lead to a
transaction, both the Financial Times itself and the website of
Axel Springer SE's Spiegel newspaper reported Thursday afternoon
that Axel Springer was the prospective buyer.
Axel Springer couldn't immediately be reached for comment.
Successful talks would result in Pearson 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--has rejected talk it would sell its salmon-colored,
business-focused title, which it has owned for nearly 60 years. On
Thursday, though, it noted recent media speculation and confirmed
that it is in "advanced discussions" regarding a potential
disposal.
Shares in Pearson traded about 2% higher after the
announcement.
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."
Current chief John Fallon--a company veteran who once 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.
As well as the Financial Times newspaper, Pearson's FT Group
includes a noncontrolling 50% stake in the Economist Group and a
joint venture with Russian business newspaper Vedomosti.
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.
Previously, Mr. Fallon has openly questioned the future of
Pearson's stake in the Economist Group, which publishes the
Economist magazine. 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. "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."
Pearson shares were up 1.4% at GBP12.26 ($19.14) in early
afternoon, valuing the company at GBP9.9 billion ($15.45 billion).
The shares traded as high as GBP12.55 earlier Thursday. Axel
Springer shares were down 1.7% at EUR49.84 ($54.21).
In February, Pearson said it expects 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.
Liberum analyst Ian Whittaker said the company's education
operations remain "deeply challenged."
The company has also completed a two-year restructuring plan,
which has hit Pearson's earnings but saved the business hundreds of
millions of dollars.
For 2014, Pearson reported a fall in net profit 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%.
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
Axel Springer.
Write to Simon Zekaria at simon.zekaria@wsj.com
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