By Simon Zekaria, Tapan Panchal and Deborah Ball
LONDON-- Pearson PLC on Wednesday sold its 50% noncontrolling
stake in the publisher of the Economist magazine to the unit's
existing shareholders for GBP469 million ($731 million) in cash, as
the U.K. firm unloaded another trophy publishing asset to focus on
education.
Exor SpA, the investment vehicle of Italy's Agnelli family that
founded automobile group Fiat SpA, is paying GBP287 million for
around half of Pearson's stake, taking its own shareholding in the
Economist Group to more than 43% from less than 5%.
The Economist Group is repurchasing the rest of Pearson's
shareholding for GBP182 million. Other shareholders in the unit
include the Cadbury and Rothschild families, as well as existing
and former staff.
As well as owning the Economist magazine, a weekly business and
international news publication, the publisher owns data firm the
Economist Intelligence Unit and U.S. politics data group CQ Roll
Call.
The disposal swiftly follows Pearson's recent sale of the FT
Group, which includes the Financial Times newspaper, to Nikkei Inc.
of Japan for GBP844 million.
Wednesday, Pearson shares fell, in line with the overall
market.
Following a sale of the Economist, Pearson's only remaining
flagship media interest is its 47% stake of book publisher Penguin
Random House.
"Almost 20 years ago Pearson embarked on a strategy to transform
into a digital education company. It was only a matter of time,"
said Bernstein Securities analyst Claudio Aspesi, who added the
prices offered for the Economist and FT were too good to
refuse.
Exor is run by John Elkann, an Agnelli family scion, who serves
as the vehicle's chairman and chief executive. It already holds
less than 5% of the Economist Group and, among other business
interests, controls Fiat Chrysler Automobiles NV.
The move to become the Economist's largest shareholder reflects
both Mr. Elkann's keen personal interest in media and his push to
further diversify Exor's holdings. Last spring, Exor sold its
interest in real estate group Cushman & Wakefield for $1.3
billion, pocketing a gain of $722 million. It then launched into a
drawn-own battle to buy reinsurance group PartnerRe Ltd., winning
control of the company last week.
But Mr. Elkann, the grandson of Gianni Agnelli, has a particular
interest in media. He sits on the board of News Corp, which owns
The Wall Street Journal. Moreover, Fiat has long owned Turin-based
daily La Stampa and the car maker also has an important stake in
the holding company that controls Corriere della Sera, Italy's
largest general-interest daily newspaper. Mr. Elkann is heavily
involved in the strategies of both companies to respond to the
downturn in the Italian media sector. Over the years, Exor has held
stakes in other publishing groups, such as Random House and Le
Monde.
In a statement, Exor pledged to respect the independence of The
Economist. The group's bylaws will be amended to limit the voting
powers of any single shareholder to just 20% and to ensure that no
individual or company can own more than 50% of the group's
shares.
The Economist Group posted an operating profit of GBP60 million
in the fiscal year ended March 31, up 2% year-over-year. However,
its revenue has fallen to GBP328 million this year from GBP362
million in 2012 amid the broader industry's battle against sliding
print advertising income. It contributed GBP21 million to Pearson's
operating profit last year.
In 1957, along with its purchase of the FT, Pearson acquired the
Economist magazine, which is historically called a "newspaper" and
has been edited continuously from London since it was founded in
1843.
The Economist magazine has seen its circulation rise steadily
over the past decade to 1.6 million, boosted by online operations
as readers gravitate to the Internet from traditional print. Unique
visitors to Economist.com increased 32% year-on-year to an average
of 11 million a month. Its long-standing editor, John Micklethwait,
departed in January after steering the magazine through the
financial crash and "digital storm," the group's chairman has
said.
Pearson expects the deal to close in the fourth quarter--subject
to approval by both a 75% majority of both the Economist Group's
shareholders and trustees--and to use the proceeds to invest in its
global education strategy, such as providing textbooks, digital
learning programs and English language schools.
It has faced calls for years to jettison its publishing
interests.
Pearson--which once was a sprawling conglomerate that included
the U.K.'s Madame Tussauds wax museums and a stake in a television
production company--makes most of its revenue from educational
services underpinned by its operations in the U.S. Í
It has restructured its operations and booked hundreds of
millions of dollars in cost savings to counter a slowdown in mature
educational markets and boost its push into developing economies
such as Brazil and China where there is greater demand for learning
services.
Write to Simon Zekaria at simon.zekaria@wsj.com, Tapan Panchal
at Tapan.Panchal@wsj.com and Deborah Ball at
deborah.ball@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires