Pearson to sell 50% stake in Economist

Close on the heels of the sale of its popular Financial Times (FT) business newspaper, British publisher and education major Pearson Plc has confirmed that it is in talks to sell its half stake in the coveted weekly publication The Economist.

The announcement came after market speculations of a possible disposal of the Economist following the sale of its 127-year old FT Group to Japanese media giant Nikkei Inc for $1.3 billion. (See: Japan's Nikkei buys Financial Times for $1.3 bn from Pearson)

In a statement released over the weekend, a Pearson spokesman said, ''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.''

''There is no certainty that this process will lead to a transaction,'' he further stated.

Pearson said that it would proceed with a sale only at the right price.

With the two latest deals, Pearson, will completely exit the newspaper business and focus solely on its education business. The sale would help Pearson to strengthen its balance sheet to improve its credit rating.

The Economist is owned by a group of wealthy families including the Rothschild family with around 22-per cent stake, Agnelli family controlled Exor holding 5 per cent, and its current and former staff.

The Economist, founded in 1843 to promote free trade and free market, refers to itself as a newspaper.

Its editor is appointed by a board of trustees, and the company's constitution does not permit any individual organization to gain majority shareholding.

The Economist Group comprises The Economist magazine, research division the Economist Intelligence Unit, and CQ Roll Call, a US legislative information provider.

Pearson bought its stake in the Economist in 1957 as part of its purchase of the FT Group. Any sale of its stake comprising class 'B' shares, and six of 13 board positions, would have to be approved by the trustees of the Economist Group which include former Conservative minister Lady Bottomley and former cabinet secretary Lord O'Donnell.

Citing some sources, FT reported the worth of Pearson's stake in the Economist at about £400 million ($620 million), which is of similar valuation to the FT Group. However, its profits were more than double that of FT at £60 million last year.

The buyers could include wealthy families such as the Cadburys, the Schroders and the Rothschilds, according to the paper.

According to some reports, media majors Bloomberg, Thomson Reuters and Axel Springer who were approached about the stake declined to pursue the acquisition, as that would not give them control of the publisher.