Henry Mance of The Financial Times writes that the 50 percent stake in The Economist that Pearson Plc wants to sell could demand a premium price from the buyer.
Mance writes, “Operating profits have more than doubled over the past decade to £60m, reflecting the publisher’s push into the US and its relative success selling digital subscriptions.
“Every year accountants at Ernst & Young value shares in the Economist Group, in order to facilitate share purchases by employees and swaps between shareholders. Their calculations suggest that the Economist Group’s equity has tripled in value since 2003 to about £730m.
“People close to the sale negotiations suggest that Pearson’s 50 per cent stake is likely to be valued at about £400m — a premium that reflects the rarity of such large disposals. Even so, as a multiple of operating profits, the stake would be worth roughly half of what Nikkei paid for the FT, because of the lack of control.
“The Economist Group’s current challenge is to buck three years of revenue declines, to £328m, caused by sharp falls in print advertising. Its set-up means that its success in doing so depends on managers — not on whether the Rothschilds, the Schroeders or the Agnellis end up as the largest single shareholder.”
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