Why the Financial Times Deal Commands a Premium

In my opinion, aged financial media assets can be worth more than general news companies. Financial media companies like the Financial Times (FT) market to a more affluent audience that is willing to pay for access, thus subscriber revenue proves to be more sustainable than pure reliance on advertising dollars. Plus, online advertising pays far less compared to print ads. The combined print and digital circulations of the FT stand at 737,000. Companies like the FT, Bloomberg and Dow Jones make tremendous amounts of money through subscriptions like Terminal revenue or DJ’s Factiva.

Newspapers and Media Assets Acquirer Sales Price – USD
Financial Times Nikkei 1.37 billion
The Washington Post Jeff Bezos 250 million
The Boston Globe and its affiliated New England media assets John W. Henry 70 milllion
Mergermarket Group BC Partners 624 million


The Deal

Yesterday, the FT announced Nikkei Inc., the Japanese media conglomerate, is acquiring the salmon-tinted paper for US$ 1.3 billion in one of the largest newspaper deals ever recorded. Nikkei is the owner of Nihon Keizai Shimbun, Japan’s largest business newspaper. By focusing on its education business, Pearson Plc, the parent company of FT, has been trying to shed non-educational units over the past year. E-learning and for-profit colleges generate vast amounts of profit for Pearson. Pearson sold Mergermarket which controls brands such as Debtwire, DealReporter, Infinata, Wealthmonitor, and Xtract Research to private equity firm BC Partners (a clear sign of Pearson getting out of the media business) for around US$ 624 million.

The FT has a number of strong subscription businesses which commands a premium over traditional media. In 2014, the FT Group pegged sales at around US$ 520 million. Also the company has a level of prestige – being a trusted news source. More importantly, companies like the FT rarely come up for sale. This scarcity of opportunity commands a premium in valuation.

This article is written by Michael Maduell and his opinions are his own and not officially of the Sovereign Wealth Fund Institute.

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