Pearson may sell Financial Times as CEO quits
PEARSON CEO Marjorie Scardino is to step down after 16 years and be replaced by the head of its international education business, spurring speculation that the company may sell the Financial Times.
BDFMoperates as a joint venture between Pearson and Avusa.
John Fallon would replace Ms Scardino in January, the Londonbased company said yesterday. The first female CEO of a major UK company, Ms Scardino was made a Dame of the British Empire in 2003 and almost tripled Pearson’s sales during her tenure. Born in Arizona and raised in Texas, the former rodeo racer helped found the Pulitzer Prize-winning Georgia Gazette.
Ms Scardino, who took over as chief in January 1997, has been expanding Pearson’s education business while pushing digital versions of books, journals and newspapers to counter stagnating print sales.
Her departure was unexpected, and raises questions over whether the Financial Times Group, which owns the newspaper and a 50% stake in The Economist, would be sold, Liberum Capital analyst Ian Whittaker said in London.
“Marjorie Scardino was a big fan of the group, John Fallon has no emotional commitment,” Mr Whittaker said. Pearson’s difficulties at its US education business, with a “likely second year of like-for-like decline and no signs of a turnaround” may have been the signal for Ms Scardino to get out “while the going is relatively good”, he said.
In July, the company reported a 9.6% drop in first-half operating profit as income from its professional training business declined.
Pearson dropped 0.6% to 1,230p in London, valuing the company at £10bn. The stock had risen 2.2% through Tuesday, while the FTSE 100 benchmark index gained 4.3%.
Liberum Capital said it values the Financial Times Group, including the stake in The Economist magazine, at about £770m.
Potential buyers for the Financial Times would be Bloomberg, News Corporation and Thomson Reuters, said Alex DeGroote, a media analyst at Panmure Gordon & Company in London.
“The Financial Times is worth a lot more to someone else than Pearson,” he said. “With the Financial Times, it’s all about the value of the brand, and the Financial Times is the classic trophy asset.”
Bloomberg would be an obvious buyer because it already has print operations with its Businessweek magazine, while News Corporation, which is in the process of splitting off its publishing holdings, could use the Financial Times as an important part for that new business, he said.
Reuters spokesman David Crundwell and Bloomberg spokeswoman Catrin Thomas declined to comment. News Corporation representatives could not immediately be reached. Bloomberg, the parent of Bloomberg News, competes with Pearson’s Financial Times in providing financial news and information. The Financial Times Group accounted for 7% of sales at Pearson last year, while education made up 75% and 18% came from the Penguin book publisher.
“We question whether Penguin and the Financial Times Group fit strategically, given Pearson’s skew to education,” said Steve Liechti, a media analyst at Investec Securities in London. “Fallon is not a lifelong publisher, so could be more brutal in his strategic direction in time.” Mr Liechti values the Financial Times Group at about £750m.
Asked about the fate of the Financial Times, Mr Fallon said yesterday that it is “highly valued and a very valuable part of Pearson”.
Mr Fallon has been chief of Pearson’s international education unit since 2008. “With more than 15,000 people in 70 countries, this division is fundamental to Pearson’s growth strategy,” the company said. Since Mr Fallon took over, international education sales increased to £1.4bn from £322m.
During Ms Scardino’s tenure, the number of Pearson employees more than doubled to 41,520 last year, while sales almost tripled to £5.87bn and operating profit more than tripled to £942m. The company’s share price has risen more than 80% since she became CEO, while the FTSE 100 index gained about 40%.
Ms Scardino is a graduate from Baylor University and the University of San Francisco’s School of Law. Prior to becoming CEO of Pearson, she was CEO at the Economist Group. In 2010, she was named a fellow of the American Academy of Arts and Sciences. Bloomberg