The Economist Group has decided to sell its five-decade-old office building in London to part-finance a share buyback from Pearson plc and retain editorial independence. Publishing and education firm Pearson will sell rest of its stake in Economist to Agnelli family, an existing minority shareholder, as per a statement.
The deal which values The Economist at £938 million (around $1.46 billion) comes as the second big news media asset sale by Pearson. Last month, it said it is selling FT Group, which runs business newspaper Financial Times, to Japan's Nikkei for £844 million, a deal which raised eyebrows over the future of editorial independence of the business publication. FT Group has almost same revenues as The Economist Group but is half as profitable.
“With their decision to sell, the board’s priority was to secure the independence of the ownership of the Group and the continued editorial independence of The Economist. The strength of the Group’s balance sheet meant that we could reorganise our shares so as to reinforce our editorial independence and benefit our shareholders. The transaction has the full support of the Board, the trustees and the current editor of The Economist as well as her surviving predecessors,” Rupert Pennant-Rea, chairman of The Economist Group, said.
Under the deal, The Economist Group will buy back 5.04 million ordinary shares representing 20 per cent of total share capital from Pearson for £182 million ($283 million).
It will part finance this share buyback by selling the Economist Complex in London and said it will look for new offices, with more space for digital media plans. The repurchased shares will be held in treasury and act as a future source of equity that can support the growth of the company, it said, adding that the transaction will be immediately accretive to earnings and dividends.
Pearson’s remaining shares in the Group including all of its 1.26 million B shares and 6.3 million ordinary shares (representing 30 per cent of total share capital) will be acquired by an investment firm of the Agnelli family, Exor, for £287 million ($447 million).
The proposed changes will be put to a shareholder vote next month and include a 20 per cent voting cap for any individual shareholder, and a rule that no one individual or company can own more than 50 per cent of the Group’s shares.
Exor, a holding of the Agnelli family that controls Fiat Chrysler Automobiles, already holds a 4 per cent stake in The Economist Group.
Other shareholders of the firm include the Cadbury and Rothschild families, as well as existing and former staff. Although Pearson held the largest stake, it did not control the media house known for its independent analytical- and liberal opinion-based take on the week gone by through its flagship property The Economist. Besides the news magazine, The Economist Group houses a research arm Economist Intelligence Unit that also serves external clients and the Washington-based CQ Roll Call.
The Economist Group was advised by Ondra Partners in the transaction.
The Group has seen its revenues and profit shrink slowly over the past few years and it closed the year ended March 31, 2015 with turnover of £328 million with operating profit of £60 million and net profit of £46 million.