UPDATE 3-Pearson puts Mergermarket on the block

Fri Jul 26, 2013 9:22am EDT

* Says M&A news service does not fit group's education focus

* Mergermarket could fetch 300 mln stg - sources

* Pearson CEO says FT not for sale

* Shares hit 12-year high

By Paul Sandle and Anjuli Davies

LONDON, July 26 (Reuters) - British publisher Pearson put its Mergermarket news service on the block on Friday while insisting that it intends to hang on to the Financial Times newspaper.

Pearson Chief Executive John Fallon said that Mergermarket, which reports M&A news and has annual sales of about 100 million pounds ($153 million), does not have a place in a group that is increasingly focused on education, digital services and emerging markets.

"While we are clear that the Financial Times itself is a strong business in its own right, and one that has a very important role to play in our emerging professional learning strategy, we can't see Mergermarket forging similar strategic or operational links with our educational company," he said.

Banking sources said that Mergermarket could fetch a price of 300 million pounds ($460 million), while analysts said that a sale would increase speculation that the Financial Times Group, which includes a stake in The Economist, could be broken up and sold off.

Fallon, however, reiterated that the FT remains a "valued and valuable part" of Pearson.

"The Financial Times is not for sale, there has been no process or any discussions about selling the FT, and there have been no approaches regarding the FT," he told reporters on Friday.

"The announcement regarding Mergermarket does not change in any way the position regarding the Financial Times."

Private equity firms that could be interested in Mergermarket include General Atlantic, Silverlake, Bridgepoint, Hellman and Friedman, Warburg Pincus, CVC, KKR and Apax Partners, the banking sources said.

Trade rival McGraw Hill Financial, which lost to Pearson in a 2006 bid battle for Mergermarket, could still be interested in the business, industry advisers said, adding that other interested parties could include data players such as Thomson Reuters and Bloomberg.

Bloomberg, Thomson Reuters and McGraw Hill Financial all declined to comment.

Pearson has appointed J.P. Morgan Cazenove as an adviser on the sale, which Fallon said had not been triggered by an approach.

COMPREHENSIVE EDUCATION

Shares in Pearson rose to a 12-year high of 13.70 pounds on Friday after it announced the sale along with first-half results. They were trading up 8.3 percent at 13.56 pence by 1311 GMT, topping the FTSE 100 leaderboard.

Fallon, who replaced Marjorie Scardino as chief executive at the beginning of the year, is reorganising Pearson to focus on fast-growing economies and digital services, rather than Europe and North America, where austerity measures are hitting public spending.

The strategy has increased speculation that the Financial Times will eventually be sold, and bankers have been looking for ways to persuade the company to do a deal, saying that selling the group in parts would maximise value.

UBS analyst Alastair Reid said the initiation of the sale of Mergermarket was encouraging. "We believe this could also refocus investor attention on a potential sale of other parts of the FT Group," he said.

Pearson, which makes about 80 percent of its profit when the education market peaks in the second half, reported adjusted first-half earnings down by a third. The fall, exacerbated by restructuring charges, was slightly deeper than the market expected.

Fallon said the market trends that the reorganisation would address are continuing. "In general, good growth in our digital, services and developing-market businesses continues to offset tough conditions for traditional publishing," he said.

Pearson said that adjusted earnings per share fell 4.9 pence to 9.9 pence, including restructuring charges, on sales up 5 percent at constant rates to 2.8 billion pounds ($4.3 billion).

Analysts were expecting sales of 2.7 billion pounds and adjusted earnings per share of 10.6 pence, according to a Thomson Reuters I/B/E/S poll.

The company expects the restructuring to cost about 150 million pounds this year and adjusted earnings per share, excluding those costs, in 2013 to be broadly level with the 82.6 pence posted in 2012.

It said it would pay an interim dividend of 16 pence a share, up 7 percent on a year ago.

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