23rd Jul 2015 16:52
LONDON (Alliance News) - Pearson PLC Thursday said it is selling FT Group, which includes the Financial Times newspaper, to Japanese media group Nikkei Inc for GBP844 million in cash, as the company moves to focus solely on its education business.
Confirmation of a deal came after the FTSE 100 publishing and education company earlier confirmed advanced talks to sell FT Group, which includes a range of financial magazines, such as The Banker and Investors Chronicle, on top of the FT newspaper and FT.com.
Nikkei, which says its flagship daily newspaper, The Nikkei, has about three million subscribers, was seen as one of the leading contenders to buy the FT Group, in competition with German publisher Axel Springer.
The deal doesn't include the sale of property at One Southwark Bridge in London - the home of the FT newspaper - or Pearson's 50% stake in the Economist Group, which publishes the Economist magazine. There was no mention in Pearson's announcement of the Vedomosti joint venture with Dow Jones and the publishers of the Moscow Times.
In a call with journalists Pearson Chief Executive Officer John Fallon said that Pearson would continue to own the property, and Nikkei would become a tenant of Pearson and pay rent. Fallon would not comment on the stake in the Economist, but noted that Pearson's stake in both the Economist and Penguin Random House is as a shareholder, and Pearson is not involved in the management of either.
Fallon told journalists that the company has reached an "inflection point in media", citing the changing ways in which readers consume news as an example, and suggested that whilst education and journalism were "both great things", they are "not the same thing", and it was felt that it was the time to find the Financial Times a new home.
When questioned over concerns about maintaining editorial integrity after the sale, Chief Executive Officer of the Financial Times John Ridding told journalists that the issue had been central when considering the deal, but cited Nikkei's track record and cultural ethos, saying he was "absolutely confident" Nikkei would "walk the talk on editorial independence."
The price was below the GBP1 billion that had been speculated in the media - although those estimates may have incorporated the stake in the Economist.
FT Group contributed GBP334 million of sales and GBP24 million of adjusted operating income to Pearson in 2014, the seller said, with circulation across print and digital rising by more than 30% over the last five years to 737,000.
When questioned on whether or not the high price tag might lead to cost cutting by Nikkei, Ridding told journalists that the FT has a lot of growth potential, and that Nikkei take a long term view in terms of building the business.
A contribution of about GBP90 million is expected to be made to the Pearson group pension plan once the deal closes, and Pearson has also committed to fund the pension plan to self sufficiency in the near term. Pearson said it expects to pay tax on disposal of about GBP60 million, though most of the proceeds from selling FT Group will be subject to tax relief.
The balance of the proceeds will be put towards working capital, and investing in Pearson's education strategy.
"The world of education is changing profoundly, and we see huge opportunity to grow our business through increasing access to high-quality education globally," Fallon said in a statement.
Pearson, which has owned the Financial Times since 1957, was once a media and entertainment conglomerate, previously owning assets including The Tussauds Group - consisting of Alton Towers and the Madame Tussauds waxwork museums.
In 2013 the company reorganised its operations into a new structure, to consist of three arms - school, higher education and professional. The FT Group makes up part of its professional segment. It sold its PowerSchool Business, which provides K-12 student information systems, for USD350 million in June.
The sale of the group requires regulatory approval. It is expected to close during the fourth quarter of 2015.
Pearson will announce interim results Friday.
Pearson shares closed up 2.1% at 1,234.77 pence on Thursday.
By Hana Stewart-Smith; [email protected]; @HanaSSAllNews; and Samuel Agini; [email protected]; @samuelagini
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