Pearson PLC, the British company that publishes The Financial Times, is said to be exploring a potential sale of its venerable business daily—known for its salmon-colored newspaper pages—for as much as $1.6 billion, according to a report by Bloomberg on Monday. Similar rumors have swirled around the FT a number of times in the past and nothing much has come of them, but there are a number of reasons why this time could be different, and why Pearson may be looking to sell.
For one thing, if the Bloomberg report is accurate, Pearson appears to have received actual expressions of interest from potential acquirers—a group that likely includes German media giant Axel Springer and Bloomberg itself (since founder Michael Bloomberg has made it pretty clear he would like to own the paper). In the past, a sale of the financial daily was mostly something that media analysts speculated about, particularly after Pearson got a new CEO who was seen as less attached to the FT brand.
After the last round of rumors in 2013, CEO John Fallon said the Financial Timeswas categorically not for sale, and that the company had not met with anyone or sought advice about a potential sale. The FT was doing well financially, he said, and was expecting to have much success with its digital initiatives, and so the parent company was committed to seeing that through. Pearson was also busy working on a merger of its Penguin book-publishing unit with competitor Random House.
With expressions of interest from potential bidders for the FT on the table, however, Pearson may be much more motivated to consider a sale now—not to mention being bound by its fiduciary duty to shareholders to consider such a deal if it might be beneficial financially. And if it can actually fetch a price of $1.6 billion, it would most certainly be good for the company.
Unlike some newspaper asset sales, particularly in North America, a sale of the FT would not be the kind of fire sale driven by a desperate desire to avoid bankruptcy that others have experienced. While Pearson doesn’t break out numbers for The Financial Times specifically, the unit of which it is a part—the professional publishing unit, which includes Pearson’s 50% interest in The Economist—generated revenue of $1.8 billion last year (Pearson reports its quarterly results next week).
Media watchers say the FT has done well online with its subscription model—which it recently changed from a metered approach to a hard paywall—in part because the outlet’s brand of hard-core financial information is something business readers are willing to pay for. The FT has about 500,000 digital subscribers (compared to the Wall Street Journal‘s 750,000), and they generate more than half its revenue.
Despite its online successes, however, Pearson has bigger problems that it might want to focus on, including a slowdown in its other major business unit, namely the international education business. This is the unit that CEO Fallon came from, and under his tenure it grew dramatically into a giant with revenues of more than $1.4 billion and profits of $200 million. But over the past year or so that growth has slowed, as textbook sales have fallen off and competition has intensified.
On top of all that, Pearson lost a significant sum of money investing in Barnes & Noble’s ill-fated Nook publishing business. The media company acquired a stake in the e-book reader business for an estimated $89 million in 2012, and Barnes & Noble bought it back last year for $28 million—but that re-purchase was a combination of cash and stock, so it’s not clear exactly how much Pearson managed to recover.
As with any acquisition rumor, the FT sale may turn out to be nothing, as it has so many other times. The company may simply be running a flag up the flagpole to see if anyone is interested in a deal, or to show its shareholders that it is pursuing every financial alternative to improve its business. But at the same time, there are some compelling reasons why this time Pearson might actually pull the trigger.
