Pearson may face monopolies inquiry

PEARSON'S pounds 73.5m purchase of the Extel Financial information service from United Newspapers may face a referral to the Monopolies and Mergers Commission, writes Gail Counsell.

The group's strong position in the supply of financial information through its Financial Times services meant a competition investigation was likely, industry sources said last night.

'This is a very regulated market and Pearson already has a key position,' said one analyst, who pointed out its purchase of the Textline database had prompted a reference. But the deal between Pearson and United is not conditional on clearance and Frank Barlow, Pearson's managing director, thought a referral 'very unlikely'.

The services offered by the Financial Times and Extel groups had only limited areas of overlap, he said. 'They are operating in neighbouring but very, very different markets.' The only area in which they might be said to coincide was the provision to newspapers of share price information.

Pearson is paying pounds 61.7m in cash and repaying pounds 11.8m of debt. Extel, with assets of pounds 1.1m, had a pounds 34.5m turnover in the year to 31 December. Operating profits of about pounds 5.6m were boosted by a pounds 700,000 pension credit but reduced by pounds 2.8m of losses on its systems division to give pre-tax profits of pounds 3.5m.

The sale produces a profit for United of more than pounds 25m, which it intends to use for 'corporate purposes'. United's shares added 34p to 583p. The company put Extel up for sale in August, saying it needed to be part of a bigger information provider to grow successfully.

Pearson expects considerable savings through sharing costs between Extel and the Financial Times. Mr Barlow said it expected to double Extel's trading margins from their current level of around 11 per cent by the mid 1990s.