DJ Bidding Dance: Expected Savings With Pearson; Analysts Skeptical; Tom Wolfe Plus John Updike


Lots of commentary and speculation following the “news” this weekend that Pearson is mulling a joint bid on Dow Jones, along with GE. Among them:
Telegraph: Pearson’s third largest shareholder has voiced its opposition to the company investing new capital in an offer for Dow Jones and urged it not to get into a bidding war with News Corp. “The most value you could get from the FT would be by selling it to Murdoch not by trying to compete with him. When you are not getting an economic value from the FT and the value is as a trophy asset if it is sold, the last thing you would want to do is pay a trophy asset multiple to buy another one [the WSJ].”
Telegraph 2: “The only way Marjorie Scardino could successfully sell [this deal] to shareholders is if it represents her exit plan for the FT Group. If she negotiates an option arrangement that allows Pearson to eventually sell, then clearly shareholders might take a more generous view. But even these arrangements can result in long drawn-out stalemates with counterparties. A better way to realize value would be to auction the FT Group to the highest bidder.”
WSJ: A GE-Pearson deal still won’t protect the two from the harsh reality of the market, and that means they would have to do significant cost cutting to make the deal work at anything close to $60 a share. Analysts estimate the FT Group, CNBC and Dow Jones would need to generate as much as $300 million a year in savings for Pearson to make an 8 percent return on its investment. That is a large sum, and the easiest way would be for the newspapers to cut their biggest expense — journalists. WSJ has roughly 700 reporters and editors, and about 100 of them work outside the U.S., while the Financial Times has 510 journalists, the majority of whom are in the United Kingdom. While it is unlikely the two newspapers would be combined, they could share some stories, allowing the FT to cut its staff in the U.S. and the Journal to cut back in Europe.
Reuters: The three-way partnership would create an odd menage, combining the loud, feisty CNBC stock picker Jim Cramer, the buttoned-down culture of the Wall Street Journal and the very British Financial Times, according to Tom Rosenstiel, director of the Project for Excellence in Journalism. “One analogy I think of is, would a book by Tom Wolfe and John Updike be twice as good as a book by either one of them? Or would it be some odd thing that would be less than the sum of its parts?”

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