Monday, June 18, 2007

Pearson 'out to scupper threat from Murdoch'


By Josephine Moulds (UK Telegraph)

Pearson's scramble to join the race for Dow Jones is a desperate attempt to scupper the creation of a powerful international rival, say analysts.

It emerged late on Friday night that the owner of the Financial Times had been looking for partners in an attempt to trump News Corporation's $5bn (£2.5bn) bid for Dow Jones, owner of the Wall Street Journal.

Rupert Murdoch's News Corp has spent months wooing Dow Jones founders, the Bancroft family, who control 64pc of the American company's shares.

"There is some logic to a bid. Pearson wouldn't want the Wall Street Journal to be rejuvenated by Murdoch," said one commentator.

"Murdoch has deep pockets, if he's willing to run it at a loss and expand in Europe and Asia, the FT's position only becomes harder."

Instead, if Pearson managed to trump the News Corp offer it could become a formidable force in business journalism.

The commentator added: "Dow Jones has the newswires business, which is basically an information provider, so it gives the FT another arm.

"It also brings together The Economist [which is 50pc owned by Pearson], FT and the Journal, three of the most influential names in business.

"You put them all together and you become the provider of the world's business information."

But would a deal make sense?

A successful bid by Pearson would put considerable strain on its finances but offer little in terms of savings.

Paul Bates, analyst at Charles Stanley, said: "Cost synergies are limited because of the regional biases of the two. There will be some story sharing but otherwise it's limited."

But geographically the two would be a good fit.

"They complement each other quite well. The Journal isn't particularly strong in Europe and likewise the FT, despite pushing for years and trying to make a go of it in America, hasn't really succeeded.

"That said, Pearson has a massive presence in the US with the schools testing business and publishing division. It knows America well, it knows the market," said one City analyst.

Pearson is in talks with General Electric over a joint bid. GE is also keen to defend itself against the Murdoch empire as it owns the business channel CNBC, which is supplied by Dow Jones and faces competition from Mr Murdoch's planned Fox business channel.

Bankers for the Bancroft family have been searching for an alternative suitor to News Corporation as they are concerned that Mr Murdoch would challenge the group's editorial independence.

Any bid, however, would have to beat News Corp's $60-a-share offer, which represents a total of more than 40 times forecast earnings.

Mr Bates said: "There is an element of self-fulfilment [in a Pearson bid].

"If you pay a good price for the Wall Street Journal it looks like the FT is worth a lot."