View From City Road: Jilted Pearson cannot have it both ways

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The Independent Online
It was like a wedding reception after an abandoned ceremony. The bride had opted to marry someone else but the jilted groom went ahead with the party anyway. Though he tried hard to make it a success, it was a soulless occasion.

The bride was StarTV, the Hong Kong satellite company, which Rupert Murdoch's News Corporation had won from under Pearson's nose earlier this week. But the British company decided to announce plans to focus on media anyway yesterday.

Pearson's proclaimed change of heart might have been more convincing had it pulled off the pounds 350m deal, which would have changed the balance of the group materially. But as it was, the spotlight was on the inconsistencies. Since when was Lazard a media company? What about Warwick Castle? Alton Towers? Madame Tussaud?

The position of Lazard is especially curious. The Pearson board, which includes six Lazard directors or partners, decided to keep it, notwithstanding the group's new orientation. It did not get independent advice on this issue, even though it has plenty of potential for conflicts of interest.

In the absence of independent advice, shareholders should force the company to consider this issue again. Either Lazard should be kept because it has attractive financial characteristics or Pearson is a media company. But it cannot have it both ways.

Pearson's record in the media industry is not an unqualified success. Though it has done well with Addison-Wesley in the US and the Financial Times in the UK, it has yet to demonstrate it can add value to its subsidiaries. Shareholders already have a large choice of media companies - including News Corporation, Reed Elsevier and Carlton Communications - to invest in. And some of these are a lot faster on their feet - witness Rupert Murdoch's actions earlier this week - than Pearson has proved to be. Mr Murdoch drove home the point yesterday when he raised pounds 76m by selling some of his Pearson holding.

Investors are likely to be far more interested in Royal Doulton, which has huge recovery potential, than Pearson. Take profits on the 'focused conglomerate' and hold on to the proceeds in readiness for the Doulton float.