Financial Times publisher Pearson sells FTSE stake for £450m

THE London Stock Exchange is buying publisher Pearson’s 50 per cent stake in FTSE International for £450m.

The LSE, which already owns half of FTSE, has ambitions to challenge Europe’s top futures exchanges, NYSE Euronext’s and Deutsche Boerse’s Eurex.

David Lester, director of information services at the LSE and chairman of FTSE International, said: “Crucially, it is an excellent fit for our growing derivatives operations and will help us develop new tradeable products.”

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The stock exchange said the deal, which it hopes to close in the first quarter of next year, will be funded from existing resources, although it has commitments from banks for £350m in additional debt for more “full financial flexibility”.

The transaction is central to the LSE’s push into listed derivatives trading which began in June when it started offering FTSE 100 futures via its electronic platform Turquoise in a direct challenge to NYSE Euronext’s Liffe.

The deal also strengthens the LSE’s links with asset managers, which use FTSE indices for benchmarking their funds’ performance, whereas the LSE has traditionally had stronger ties with banks and brokers.

Analysts said Pearson, which owns the Financial Times newspaper, Penguin Books and a large education unit, had secured a decent premium for a business that was no longer core to its central strategy.

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Panmure Gordon analyst Alex DeGroote told Reuters: “It’s a good price from Pearson’s point of view and it continues the process of them rationalising their non-core assets.

People in the market will likely make the follow-on observation that the FT looks a more plausible sale candidate now than before but I’d make the point that there’s absolutely no need for them to sell it in a hurry.”

Marjorie Scardino, chief executive of Pearson, said in a statement: “FTSE’s strategy is different from our own.

“We wish it every success as we continue to build our digital business information services around the Financial Times.”

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FTSE International made earnings before interest, tax, depreciation and amortisation of £40m in 2010, Pearson said, more than some analysts realised.

UBS analyst Alastair Reid wrote in a note: “It does suggest other parts of FT Group may be less profitable than the market expects, but with FT valuations more driven by trophy asset value rather than near-term profitability, we believe this should not impact consensus valuations.”

Pearson used much of the $2bn it collected from the 2010 sale of data provider IDC for education acquisitions in China and India. Last month, it bought a Chinese English-language training company for $155m, extending its reach in China from eight cities to 60.

“We are freeing up capital for continued investment in a proven strategy: becoming more digital, more international and more service-oriented in education, business information and consumer publishing,” Ms Scardino added.

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