By Simon Zekaria
LONDON-- Pearson PLC on Thursday said it would sell FT Group,
which includes the Financial Times newspaper, to Nikkei Inc. of
Japan for GBP844 million ($1.32 billion).
The cash sale means Pearson is 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--had rejected talk it would sell its salmon-colored,
business-focused title.
However, Pearson Chief Executive John Fallon said in a statement
Thursday afternoon that after nearly 60 years of ownership, "we've
reached an inflection point in media, driven by the explosive
growth of mobile and social. In this new environment, the best way
to ensure the FT's journalistic and commercial success is for it to
be part of a global, digital news company."
Shares in Pearson traded more than 2% higher in afternoon
trading in London.
The agreement doesn't include FT Group's London property at One
Southwark Bridge or Pearson's 50% stake in the Economist Group but
does include its joint venture with Russian business newspaper
Vedomosti. The transaction is subject to a number of regulatory
approvals and is expected to close during the fourth quarter of
2015, Pearson said.
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."
Mr. Fallon--a company veteran who 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.
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.
Although Mr. Fallon had openly questioned the future of
Pearson's stake in the Economist Group, which publishes the
Economist magazine, the company seems committed to keeping it for
now. 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, before the
announcement of the deal with Nikkei. "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."
For Pearson, the sale of the FT comes after it has completed a
two-year restructuring plan, which has hit earnings but saved the
business hundreds of millions of dollars.
In February, Pearson reported a fall in net profit for 2014 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%.
At the time it said growing digital circulation offset declines
in print content and advertising, without giving figures.
It also forecast 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.
However, Liberum analyst Ian Whittaker said the company's
education operations remain "deeply challenged."
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
Nikkei.
Write to Simon Zekaria at simon.zekaria@wsj.com
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