INDEPENDENT STREAK: The Financial Times entered a new era Thursday when the Japanese media corporation Nikkei Inc. acquired the FT Group for 844 million pounds, or $1.32 billion at current exchange, from its British owner Pearson plc.
The move caps six decades of Pearson’s ownership and ends years of on-again, off-again speculation that the title was for sale. The most recent speculation surfaced earlier this week, with wire reports – citing unnamed sources – reporting that talks with potential buyers were ongoing.
“Pearson has been a proud proprietor of the FT for nearly 60 years,” said John Fallon, Pearson’s chief executive officer. “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.”
Fallon said during a conference call Thursday that the firm’s executives had been mulling a sale of the FT over the past year. “This was a thoughtful, considered process that played out over a long period of time,” he said.
The agreement does not include the FT’s London headquarters at One Southwark Bridge or Pearson’s 50 percent stake in The Economist Group. Fallon said that Nikkei will become a tenant of Pearson in the headquarters, paying a commercial rent on the building. The deal, which is subject to regulatory approvals, is expected to close in the fourth quarter.
During the conference call, John Ridding, ceo of The Financial Times, underlined that Pearson was drawn to Nikkei’s long- term vision for the group, and said that he didn’t envisage the corporation “cutting costs” at the paper. “Certainly we think there’s a lot more return that can be generated at the FT, but the key point is Nikkei are taking a very long-term view of this investment,” said Ridding. “They see significant growth potential for the FT, particularly in Asia and the U.S….there’s no point in their mind buying the FT to take costs out of it – they want to build the business and grow revenue. It’s about investment and growth, not about cost cutting.”
Pearson said Thursday that the FT’s total circulation across print and digital has risen 30 percent over the past five years to 737,000, with digital circulation representing 70 percent of the total, and mobile driving half that traffic. The FT Group contributed 334 million pounds, or $521 million, of sales and 24 million pounds, or $37 million, of adjusted operating income to Pearson in 2014. Fallon said during the call that the $1.3 billion paid for the group “reflects the premium quality of the FT and is a very good return for Pearson’s shareholders.”
Fallon and Ridding also said that the new owners would preserve the FT’s editorial independence. “The issue of editorial independence was a central condition of this whole project, it’s an essential,” said Ridding. “I’m absolutely confident that [Nikkei] really walks the talk of editorial independence and all the values that go around that.” Fallon also noted that Nikkei was impressed by “the quality and leadership of the Financial Times, both in editorial and commercial terms,” saying the paper has proved that “people will pay for quality journalism.”
Fallon added that Pearson would now be entirely focused on its global 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,” he said. Ridding, meanwhile, pointed out the importance of “focus” for the FT during the call. “It’s hard to ride two horses at once, it’s very hard to win on both, so this idea that…[being] within an organization like Nikkei, which is fully focused on news and news media provides that focus.”
Indeed, professor Steve Schifferes, director of the financial journalism master’s program at City University London, said “weakness in [Pearson’s] core educational business in the U.S. has probably encouraged the lucrative sale [of the FT Group] ahead of its own earnings statement.” Pearson is set to report first half results Friday.
Pearson produces and publishes educational resources, and also holds a stake in publishing group Penguin Random House.
Schifferes said that while Nikkei “probably paid above the odds to acquire the FT,” the acquisition “will undoubtedly enhance the global profile of the Nikkei group. The fact that another important regional media group, Germany’s Axel Springer, was also actively in the bidding, shows the attractiveness of this strategy.”
Tsuneo Kita, chairman and group ceo of Nikkei, called the FT “one of the most prestigious news organizations in the world. Our motto of providing high-quality reporting on economic and other news, while maintaining fairness and impartiality, is very close to that of the FT. We share the same journalistic values. Together, we will strive to contribute to the development of the global economy.”
Ahead of announcing the sale, Pearson issued a statement earlier Thursday confirming that it was “in advanced discussions regarding the potential disposal of the FT Group.”
The statement came in response to a Reuters report stating that Pearson was planning to sell the Financial Times to a “global, digital news company,” citing a person familiar with the deal.
Earlier this week, Bloomberg, citing unnamed sources, reported that Pearson was exploring a sale of the Financial Times, and further reports mooted Bloomberg, Axel Springer and Thomson Reuters as potential buyers. According to an FT report Thursday, bidding for the paper went “to the wire,” with Axel Springer still bidding for the company Thursday morning, only to withdraw after not being prepared to go above Nikkei’s winning offer. The report also said the FT had been in discussions with Axel Springer over the past year.