City takes the pressure off Pearson chiefs

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The Independent Online
The new management at Pearson, the beleaguered media conglomerate, is to get a honeymoon period to develop a coherent strategy, according to leading City institutions.

Swirling takeover rumours and steady criticism of the company's diverse mix of media assets meant outgoing managing director Frank Barlow and chairman Lord Blakenham were under intense pressure to break the company up.

But according to several top institutional shareholders, the chief executive- elect, Majorie Scardino, and Dennis Stevenson, who will take over as chairman next year, will get what one fund manager called "the benefit of the doubt" as they attempt to steer the company to a clearer strategy.

The news will be welcome at Pearson, which has already reviewed plans to sell its stake in Lazard Brothers, the merchant bank, as well as its theme park operation, grouped under Madame Tussauds.

According to a report published today by Henderson Crosthwaite, the institutional brokers, Pearson could get as much as pounds 400m for its Lazard stake, which would be sold to the Lazard management. Of this, about pounds 305m would remain following capital gains tax. Tussauds could generate pounds 267m net of tax and expenses, while the rump 4 per cent stake still held in BSkyB could fetch another pounds 245m after tax.

Henderson's media analyst, Louise Barton, also recommends the sale of Mindscape, the CD-Rom manufacturer. She estimates a gain of about pounds 141m, after taking into account a capital loss on the transaction of pounds 250m. Ms Barton said: "The net return from the sale of the stakes in BSkyB and Mindscape would more than offset the dilution caused by the sale of Lazards and Tussauds."

All told, the sales would net about pounds 1bn after expenses, leaving the company with net cash of about pounds 500m. "New Pearson would then have better cash flow and hold leading market positions in three core areas," Henderson Crosthwaite argues. These would be business and professional information (including the Financial Times Group), consumer publishing (Pearson, Addison-Wesley-Longman and Pearson New Entertainment) and broadcasting (including Thames Television and a stake in Channel 5).