Pearson to sell stake in The Economist to Agnelli family for $731 mn

Within three weeks of the sale of its popular Financial Times (FT) business newspaper, British publisher and education major Pearson Plc has sold a significant chunk of the coveted weekly publication The Economist.

Britain's Pearson yesterday agreed to sell a 38.7-per cent stake in the Economist to Italian investment company Exor S.p.A. for $731 million (£469 million), making Italy's Agnelli family the largest shareholder in the 173 year-old weekly title.

The deal comes less than a month after Pearson agreed to sell the Financial Times and related titles to Japanese business publisher Nikkei for £844 million in order to focus on its core education business (See: Japan's Nikkei buys Financial Times for $1.3 bn from Pearson).

Within three days of announcing the deal with Nikkei, Pearson set to rest market speculation about the likely divestment of The Economist.

Under the terms of the deal, Exor – an investment company controlled by the Agnelli family, which holds majority stake in Fiat Chrysler and has interests in commercial real estate, banking, and soccer club Juventus, will pay £287 million to hike its stake to 43.4 per cent from 4.7 per cent, and he Economist Group will pay £182 million to repurchase Pearson's remaining ordinary shares.

The Economist Group will fund the purchase through the sale of its headquarters in London's Mayfair neighborhood. In March, The Economist had said that the value of its headquarters was around £100 million.

The deal values the Economist Group at £955 million, including net debt of £17 million.

The transaction is subject to a number of regulatory approvals and the approval by a 75 per cent majority of the Economist Group shareholders and also the group's independent trustees.

Pearson said that the provisions of the City Code on Takeovers and Mergers do not apply to The Economist Newspaper and the transaction is expected to close during the fourth quarter of 2015.

The Economist Group contributed £21 million to Pearson's operating income last year and approximately 3 pence to adjusted earnings per share.

Other stakeholders in the Economist Group are the Rothschild family with around 22-per cent stake, and its current and former staff.

After the Agnelli family, the second-largest shareholder in the Economist Group will be Lady Lynn Forester de Rothschild and her husband Sir Evelyn whose stake would go up to 26 per cent stake, from 22 per cent.

The Economist, founded in 1843 by British businessman and banker James Wilson 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 organisation to gain majority shareholding.

The Economist will amend its articles of association to see that no single shareholder can have more than 20 per cent of the voting power, or can hold more than 50 per cent of the shares.

''We have always admired the editorial integrity and thoroughly global outlook that are the hallmarks of The Economist's success,'' said John Elkann, Exor's CEO.

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.