Pearson CEO’s departure could lead to FT sale

The first female FTSE CEO to step down at year end
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First Published: Wed, Oct 03 2012. 07 09 PM IST
Scardino will be replaced by John Fallon, the chief executive of Pearson’s international education division since 2008. Photo: Reuters
Scardino will be replaced by John Fallon, the chief executive of Pearson’s international education division since 2008. Photo: Reuters
Updated: Wed, Oct 03 2012. 11 26 PM IST
London: Pearson Plc’s chief executive officer Marjorie Scardino will step down after 16 years, potentially clearing the way for her successor at the global educational and media group to sell the Financial Times newspaper.
The first female chief executive of an FTSE 100 company had previously declared that the famous pink-paged FT title would only be sold “over my dead body”. The FT Group also holds a 50% stake in The Economist.
She will step down at the end of the year to be replaced by John Fallon, the chief executive of Pearson’s international education division since 2008.
Analysts said the choice showed where the group’s priorities lie and that the 50-year-old Fallon would now have to also focus on the large education business in the US, which has been hit by tight school budgets.
“Scardino was a big fan of the FT and resisted attempts to sell the business,” said Ian Whittaker at Liberum. “We see John Fallon as having no emotional commitment to the division. We value the FT Group at around £770 million.”
Shares in the group were down 0.6%, slightly underperforming a flat FTSE Index.
Both Bloomberg and Thomson Reuters have been linked with a purchase of the FT Group in the last year but analysts note that Pearson has a strong balance sheet and would only need to sell the FT if it needed the money for a large and transformational deal.
Although the FT Group has succeeded in expanding digital sales and subscription revenues, a sale of the title would still fit with the group’s wider strategy of moving away from volatile advertising revenue.
Investors could also question the future of the book group Penguin within the wider firm as some analysts believe it also fails to support the growth of the dominant education division.
Scardino, one of the longest-serving bosses of a FTSE company, transformed a diverse set of assets into a successful global educational and media business.
“She navigated two recessions, one financial crisis, a dot com boom and bust and several waves of structural industry change,” Pearson chairman Glen Moreno said.
“Not only are Pearson and Marjorie still around to tell the tale but over the past 16 years our... profits have hit last year’s all-time high.”

Ever-changing portfolio

During her tenure, Scardino led a string of major deals.
In her early years, she sold off such leisure attractions as Madame Tussauds and Alton Towers, stakes in BSkyB and investment bank Lazard before selling in more recent years a stake in Interactive Data Corp. and a 50% stake in FTSE International.
The numerous disposals have allowed Pearson to expand its education and testing business around the world. The group has tripled sales to nearly £6 billion under Scardino’s watch and boosted profit more than three times to a record high of £942 million in 2011.
The Pearson share price has risen by 88% since Scardino took over in 1997, compared with the FTSE All-share Media index which is up 8% in the same period.
“We question whether Penguin and FT Group fit strategically, given Pearson’s skew to education,” Investec analyst Steve Liechti said. “Fallon is not a lifelong publisher, so could be more brutal in his strategic direction in time, and shareholders would push for asset sales and cash returns in our view.”
Chairman Moreno said he did not see the new appointment as a signal for a change in strategy. But analysts warned that the new appointment could lead to further changes within senior management, if executives overlooked for the top job decide to move on.
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First Published: Wed, Oct 03 2012. 07 09 PM IST
More Topics: Pearson | FTSE | Marjorie Scardino | FT Group |
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