Pearson in $114m windfall from CBS MarketWatch sale
Wednesday 08 December 2004
Pearson, the owner of the Financial Times, is set to pocket $114m (£59m) from the planned sale of CBS MarketWatch, a US financial news website.
The British company has a 22 per cent stake in MarketWatch and is considering a $519m offer for the business from Dow Jones.
Analysts said they had not yet factored in the exceptional profit to be booked on the disposal. Some were only vaguely aware of the stake's existence. Simon Baker, an analyst at SG Securities, said: "It's a stonking price to have achieved for a business that had fallen below the radar screen."
MarketWatch was a legacy from the days of dot.com fever, when Pearson, along with other media groups, invested in building up its online presence.
Investors have been stunned at the price that Dow Jones, the publisher of The Wall Street Journal, was ready to pay for the website. Dow Jones faced competition for the business, which had been put up for sale, from Viacom, Yahoo! and The New York Times Company.
Dow Jones has offered to pay $18 a share. Last year MarketWatch, which is listed in the US, made a net profit of $2.7m on earnings of 14 cents a share. However, on announcing the proposed acquisition, Dow Jones insisted it would be earnings enhancing from 2006.
For Dow Jones, the deal also represents a change in internet strategy. So far the company has pursued a model of only charging for content, with the website of the Journal, WSJ.com, having more than 700,000 subscribers. MarketWatch's main websites are free and attract about 8 million users a month. Dow Jones has said that it aims to keep MarketWatch's identity as a market-driven news site aimed largely at individual investors.
Pearson has pursued a hybrid strategy with the website of its Financial Times newspaper, FT.com, with basic content available free, but the archive and other features requiring a subscription.
A spokeswoman for Pearson said she could not disclose the value that the MarketWatch stake is held at in the company's books. Pearson ended up with the MarketWatch stake through a deal struck in 1999, when it combined its asset valuation business with Data Broadcasting Corporation, which had a holding in MarketWatch.
Shares in MarketWatch climbed as high as $130 in 1999 and sank as low as $1.06 in 2001.
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