NEW YORK (The Deal) -- Education publisher Pearson (PSO) has agreed to sell its 50% stake in the Economist Group to a combination of Italian investment company Exor and the magazine publisher itself, ending days of speculation that the Rothschild family would take up any shares not bought by Exor.
Announcing the sale on Wednesday, Pearson said it would sell the holding for £469 million ($731 million) in cash, and that Exor would purchase 27.8% of the Economist's ordinary shares for £227.5 million and the remaining shares, all special "B" shares with reduced rights, for a further £59.5 million. The investment takes its stake to 43.4% of the company.
The remaining ordinary shares will be repurchased by the Economist Group for £182 million. The Economist Group is expected to help finance the acquisition through the sale of its headquarters in London's fashionable St. James district.
Exor is an investment vehicle of the Agnelli family, which controls auto-maker Fiat Chrysler Automobiles (FCAU - Get Report) and currently owns 4.7% of the Economist Group. The remaining 45.3% of the group not held by Pearson is largely owned by the Rothschild, Cadbury, Layton and Schroeder families.
The fact that it is the Economist Group itself that is buying the remaining shares appears to mean the Rothschilds are not increasing their direct stake in the company while the Cadburys and the Schroeders sit on their hands. The constitution of the Economist Group will be changed to limit the voting power of any shareholder to 20%. The Economist is also exempt from U.K. Takeover Code rules, which would normally require an investor acquiring over 30% of the company to make a general offer for the remainder of the shares.
The three families bought their holdings in 1927, alongside the owner of what was then the Financial News. The Financial Times precursor only sold its stake to Pearson 30 years later.
The sale comes less than three weeks after Pearson sold the Financial Times Group to Nikkei for £844 million, and leaves the group to focus exclusively on what it calls its global education strategy.
As well as the flagship Economist magazine and Web site, the Economist Group includes the Economist Intelligence Unit, a consultancy and several upscale magazines.
Pearson reports its stake in The Economist Group as an associate and includes 50% of its profit after tax in operating income. In 2014, The Economist Group contributed £21 million to Pearson's operating income and approximately 3 pence to adjusted earnings per share. As of Dec. 31, 2014, the carrying value of Pearson's investment in The Economist Group was zero.