FT Group could take over Economist

By JAMES ASHTON
Updated:

 

Blue-blooded shareholders in The Economist are warming to the idea of selling out to Financial Times owner Pearson after conducting an informal valuation that puts a hefty price tag of anything up to £1bn on the fast-growing business magazine.

The Economist magazine

The title is half-owned by Square Mile grandees including the Rothschild, Cadbury and Schroder families.

They have traded shares between themselves before and last year rejected polite overtures from Pearson to cash in.

Pearson already owns the other 50%, as part of its FT Group news arm.

Established in 1843 by Scottish hatmaker James Wilson, sales of The Economist have doubled to more than 1m in the last decade after US readership took off.

Pearson stepped in to rescue the title when it almost went bust 80 years ago.

But its early woes are a far cry from the annual profit of £24m it made in 2005, far in excess of the FT's skimpy £2m.

Insiders say that earnings are likely to leap to £40m in the next few years. It also owns the lucrative freehold to its shiny St James's headquarters. In addition, there is more value in its consultancy arm, the Economist Intelligence Unit.

With numbers like these doing the rounds, investors may question why Pearson values its 50% stake at just £79m in its books.

FT Group boss Rona Fairhead is keen to tidy up ownership of assets, including The Economist stake. Investors think the FT division itself could eventually be sold or spun off from Pearson (up 5p at 828½p yesterday). Carlyle is among private equity buyers thought to have recently run the slide rule over the Pink 'Un.

Selling down the families' holding in The Economist would be a complicated process.

It needs to be approved by a board of trustees. Meanwhile, Pearson is on course to announce strong numbers on Monday. JP Morgan has pencilled in annual pretax profits of £496m, up 18%. Its performance in supplying school textbooks and marking exam papers contrasts with that of Reed Elsevier (down 4p at 620½p yesterday).

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