The FT deal and print media mergers

So pearson has sold the FT Group (with its flagship newspaper) to Japan’s Nikkei for $1.32 billion. Pearson will use the cash proceeds to increase its investment in education publishing businesses in the US and Canada, now 75 per cent of revenues. This deal is a milestone in the history of newspaper publishing and my own life as an investor/financial journalist.

I discovered the FT as a teenager in Dubai and began to learn about the world of money and markets from its salmon pink pages. Pearson has owned the FT since decades before I was even born and built it into the most valuable print media brand in the world. But now Pearson has seen the future and decided to transform itself into a digital, content driven, social-/mobile-based franchise.

This deal does not include its dark-blue glass FT head office on Southward Bridge or its 50 per cent stake in the Economist Group. The FT, whose pedigree goes back to 1888 in Victorian London (the autumn of Jack the Ripper in Whitechapel), was defined by successive Pearson CEOs as the commercial and strategic crown jewel of the publisher. Now, current CEO John Fallon has sold it to the Japanese.

Digital testing/teaching technologies and services is admittedly a higher growth, higher margin segment than newspaper publishing. The FT’s print/online circulation is 700,000 of the most affluent, educated readers on the planet. FT.com is the most successful online financial news site on the Internet with 20 per cent annual growth in digital subscriptions. If ever there was a global media trophy asset, this is it. Will the Economist (circulation 1.6 million) be next to fall to Fallon’s axe? Yes, it will.

Since I speak only primitive, awful Japanese, I cannot read Nikkei’s flagship — the

as it is more popularly known — but I understand the economies of its three million circulation base all too well. How will the FT survive in Japanese media’s see-no-evil, hear-no-evil kowtow to the shogun media culture? Yet Fallon runs a business, not just a bastion of Anglo-Saxon political culture.

As print content and advertising is in a secular slump, the FT had to go. My twins, members of the PlayStation generation (born in 1996) consume news online, even daddy’s columns. In the next decade, media cognoscenti fear the newspaper destined to share the fate of the buggy whip, black-and-white TV and the brontosaurus. The first digital generation in human history simply does not consume news via print media.

Nikkei now joins Bloomberg and News Corp as one of the world’s top three financial news publishers. It does not surprise me that 70 per cent of the FT’s subscribers are digital. Real-time financial news has migrated to the Internet, even here in the Gulf, with its surreal media economics, content and corporate cultures.

The FT was a magnet for high-end advertisers because it targeted its actionable financial and investment content to a defined affluent segment “How to spend it” was a beauty. This is a winning formula for Gulf publishers, who operate in a $5 trillion Arab wealth market.

The FT only contributed £24 million or a mere three per cent of Pearson operating profits. This means Nikkei is paying 35 times earnings for the FT, a stratospheric valuation for a print media asset. Newspapers in the US sell for six to eight times earnings.

cost Jeff Bezos one-fifth the price tag the FT commanded at its sale. This is a financial windfall for Pearson. This cash sale will boost Pearson’s credit rating and allow it to invest in education software. Expect a billion-dollar deal frenzy in this niche.

I had recommended Fiat Chrysler Automobiles back in 2012 and the shares doubled since that time. So Ferrari’s new IPO filing (Fiat Chrysler owns 90 per cent) is another investing milestone for me.

Dr Enzo Ferrari’s company could well be worth $10 billion on the NYSE. Sergio Marchionne has hit a homerun for his shareholders. Ferrari sold 7,255 cars in 2014 but could well face headwinds in China, the Gulf, Russia and Europe.

Marchionne plans to ramp up production. No more one year wait for a Spider, signore Marchionne? Molto bene, Capo di tutti Fiat capi!