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In the pink

4 October 2012 By Jeffrey Goldfarb

A sale of the FT would surely defy the financial times the newspaper documents. The impending departure of Marjorie Scardino as chief executive of Pearson, parent company of the Financial Times, makes a change of ownership more likely. Her replacement said on Wednesday the publication is a “highly valued” asset. But the paper’s status could make it more valuable to someone else.

The FT is a sexier business than history textbooks. Even so, the newspaper and related parts of the FT Group, including Mergermarket and a half stake in the publisher of the Economist, accounted for only 6 percent of Pearson’s adjusted operating profit last year. That makes it dispensable.

What might the group be worth? The publicly traded parent companies of the New York Times and the Washington Post, both of which have ancillary businesses like the FT’s, provide a starting point. They’re each valued at about 60 percent of last year’s sales. On that basis, adding a standard 30 percent takeover premium, the FT Group would be worth around 350 million pounds.

But Bloomberg LP and Thomson Reuters, owner of Breakingviews, would probably treasure the FT’s clout. Bloomberg has already shown an appetite for print outlets by acquiring BusinessWeek magazine. And though the Thomson family disposed of its print publications long ago, the top editorial brass at Reuters hails from the Wall Street Journal and the FT could give them back a familiar showcase.

Expected cost savings would help those companies pay up, even if News Corp’s experience might curb their enthusiasm. Rupert Murdoch’s empire paid over the odds for Journal parent Dow Jones. The paper is now part of a collection of publishing assets being spun off at what will probably be a much lower valuation.

The ultra-wealthy may, however, be less concerned with the bottom line. Entertainment mogul David Geffen, Russian oligarch Alexander Lebedev and Carlos Slim, the world’s richest man, are among those who have shown interest in newspapers. The ranks of the world’s billionaires are swelling, too: there are more than 1,200 of them, according to Forbes, 75 percent more than in 2005.

That suggests the FT Group should be thought of more like a trophy sports team. Soccer club Manchester United fetches a valuation of four times trailing revenue. Using that metric would make the FT business worth 1.7 billion pounds. That’s perhaps too rich for even for the most eager buyers. Split the value difference with rival newspapers, and the figure is around 1 billion pounds. That’s a price Pearson shareholders might be very happy to see on a salmon pink front page.


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