Pearson shares climb further as bid rumours spread

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The Independent Online
Shares in Pearson, the potential bid candidate, continued to climb yesterday, as market attention focused on it for the second day running. Pearson has risen 16p to 666p in two days' trading, as rumours circulated that members of the Cowdray family, who control about 10 per cent of the shares, could be willing to sell at the right price.

The speculation followed reports in the Independent on Tuesday that Granada, the television and leisure company that last week won a takeover battle for Forte, had considered mounting a bid for Pearson last year at up to pounds 9 a share, or pounds 5bn.

According to estimates prepared by Henderson Crosthwaite, Pearson is easily worth pounds 9 a share to a bidder looking to break up the company.

"The market has taken the view that Pearson is a major potential bid candidate," Louise Barton, analyst at Henderson Crosthwaite, said. "There is a store of hidden value, and it hasn't been agressively managed."

Analysts predicted that Pearson itself would consider demerger in the course of 1996. Earlier this month, it announced a new management structure, placing the three core business lines under separate executive control.

NatWest Securities yesterday changed its recommendation on Pearson from "reduce" to "hold", and advised that the company was a "prime candidate" for demerger.

"It is important in this environment that companies stick to their knitting, doing what they know best," Andrew Walsh at NatWest said.

Pearson declined to comment on the speculation. A spokesman said: "We look at the structure all the time. We have just announced new reporting lines and you can assume those changes reflect careful thought about the structure and how we want to develop it in the future."

The trend toward hiving off disparate businesses has swept the market, but has come late to the media sector, according to analysts.

Most recently, Thorn EMI has announced plans to spin off its music and entertainment arm. According to NatWest, both Pearson and MAI, Lord Hollick's media and financial services company, could maximise shareholder value by announcing demerger plans.

Informed sources say Pearson Television might be the most obvious candidate for demerger, following a spate of acquisitions in recent months. The prospect of a separate listing for Pearson TV is said to have been discussed internally.