Talks to sell 50% stake in Economist

Pearson looks to sell its stake in weekly paper after sale of Financial Times, as it focuses on education

LONDON • Britain's Pearson is in talks to sell its 50 per cent stake in The Economist to the other shareholders of the weekly newspaper, with one, Italy's Agnelli family, confirming it wants to increase its stake.

The move comes on the heels of Pearson's sale of the Financial Times newspaper to Japanese media group Nikkei, announced last week as its focuses on its education business. "Pearson confirms it is in discussions with The Economist Group Board and trustees regarding the potential sale of our 50 per cent share in the group," the company said in a statement last Saturday.

"There is no certainty that this process will lead to a transaction."

Pearson did not name the potential buyers.

People familiar with the matter said, however, that the group of families and staff and former staff that own the remaining 50 per cent are talking to Pearson but need to raise cash to fund the deal. Italian holding company Exor, the investment company of the Agnelli family and a major shareholder in Fiat Chrysler Automobiles, said later on Saturday that it was in talks about raising its stake, which stands at 4.72 per cent, according to its website.

Any increased investment in The Economist Group would represent a minority shareholding and there was no certainty a deal would be concluded, it said in a statement.

Fiat is a shareholder in RCS Mediagroup, which publishes newspaper Corriere della Sera. As well as the Agnellis, the owners of The Economist include other European dynasties such as the Cadbury, Rothschild and Schroder families.

The co-owners of the weekly publication, which had a paid circulation of 1.6 million at the end of last year and reported £67 million (S$143 million) in annual operating profit last month, have greater voting rights than Pearson, which holds only B shares. Any change of ownership would need the consent of the holders of the A shares, an analyst told Reuters last Friday.

It would also need to be approved by trustees who are tasked with preserving the independence of the ownership of the company and the editorial independence of the title. The families were unlikely to back any plans by Pearson to sell to a third party, industry bankers said.

Bernstein analyst Claudio Aspesi estimated the stake could be worth £300 million to £400 million, based on a multiple of 15 times its net income of £46 million.

It is unlikely that any offer would reflect the same rich multiple that Nikkei agreed to pay for the Financial Times. The Japanese company had been in competition with Germany's Axel Springer to win control of the trophy asset.

Besides The Economist itself, the group operates several subsidiaries, including The Economist Intelligence Unit, Economist Events and Economist Corporate Network.

REUTERS

A version of this article appeared in the print edition of The Straits Times on July 27, 2015, with the headline 'Talks to sell 50% stake in Economist'. Print Edition | Subscribe