FT and Economist sales match NYT value

Financial Mirror (Cyprus) - - FRONT PAGE -

The Fi­nan­cial Times was sold to Nikkei, the large Ja­panese media com­pany, for $1.3 bln. The FT’s pub­lisher, Pear­son Group ad­mit­ted its 50% of The Economist was also on the block. Some es­ti­mates of the value of this 50% of The Economist put it as high as $600 mln. The value of these trans­ac­tions, at nearly $2 bln, could match the mar­ket cap­i­tal­i­sa­tion of The New York Times (NYSE: NYT), which is not for sale, ac­cord­ing to its con­trol­ling share­holder. The New York Times Com­pany may wish to re­visit that de­ci­sion in light of Pear­son’s M&A ac­tiv­ity.

Pear­son man­age­ment made the odd com­ment that Nikkei could carry the stan­dards of The Fi­nan­cial Times, as the UKbased com­pany no longer could. John Fal­lon, Pear­son’s chief ex­ec­u­tive, said: “Pear­son has been a proud pro­pri­etor of the FT for nearly 60 years. But 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.” In terms of global and dig­i­tal, Nikkei barely qual­i­fies. As Pear­son con­tin­ues to re­struc­ture as an ed­u­ca­tion com­pany, it’s man­age­ment ad­mit­ted over the week­end: “Pear­son con­firms it is in dis­cus­sions with The Economist Group Board and trustees re­gard­ing the po­ten­tial sale of our 50% share in the Group. There is no cer­tainty that this process will lead to a trans­ac­tion.”

One set of buy­ers may be cur­rent own­ers of the other half, which are com­prised mostly of a group of wealthy fam­i­lies. Per­haps they can en­sure the jour­nal­is­tic in­de­pen­dence of The Economist Group bet­ter than Pear­son can. How­ever, the rea­son for this ar­gu­ment has no ap­par­ent foun­da­tion.

The price put on The FT Group and The Economist Group are well be­yond the abil­ity of buy­ers to “get their money back” over any fore­see­able fu­ture. These brands carry a value be­yond fi­nan­cial ones. And, pre­sum­ably, the chance to main­tain the ed­i­to­rial in­de­pen­dence en­joyed over a pe­riod which spans back more than a cen­tury is crit­i­cal to the de­ci­sions of buy­ers as well.

There are very few jour­nal­ism brands which carry the weight that the FT Group and Economist Group do. Among those brands is The New York Times. Its rev­enue in the last re­ported quar­ter was $384 mln, down al­most 2%. The com­pany lost over $14 mln, com­pared to a profit of $1.7 mln in the same quar­ter a year ago. The Times man­age­ment pointed out that it had sev­eral one-time items in the 2015 quar­ter. One-time items have be­come reg­u­lar as the com­pany con­tin­ues to cut costs. Observers of the Times fi­nan­cials regularly point out that the pri­mary rea­son the com­pany posts prof­its at all is that ex­penses are cut more than rev­enue falls.

Ev­ery time a ma­jor jour­nal­ism brand is sold for a large pre­mium above its fi­nan­cial value, the sale of The New York Times comes up again. These ob­ser­va­tions al­ways carry with them the re­al­ity that the com­pany is worth much more than its mar­ket cap­i­tal­i­sa­tion, be­cause it is such an im­por­tant media brand. If so, its mar­ket cap, at $2.2 bln is much too low.

The New York Times fi­nan­cials make it in­evitable that the con­trol­ling trust set up by the Sulzberger fam­ily and its rel­a­tives, which con­trol over 90% of the B Class shares, will need to find cap­i­tal to fund the com­pany’s fu­ture. As some highly re­garded old media print brands, which have only re­cently moved into the dig­i­tal age, find new well-funded buy­ers, an­a­lysts say it is time for the Times to re­visit its fi­nan­cial fu­ture as well, par­tic­u­larly if it wants to safe­guard its ed­i­to­rial in­de­pen­dence well into the fu­ture.

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