Are Germans about to buy Financial Times?

I'm afraid there are no prizes for guessing that Pearson is selling the Financial Times. The briefest of press releases Thursday confirmed it is in "advanced discussions" regarding the sale of FT Group, but rumours of a disposal have been doing the rounds for years.

The pink 'un has looked out of place at the increasingly education-focused Pearson, and a sale really is the most logical step. Who the buyer is and how much they will pay is the subject of much debate - the newshounds at the FT will probably know, but for obvious reasons they're not saying.

Pearson has owned the FT since 1957 when the company was a conglomerate of publishing, manufacturing and oil interests. A game of "guess the buyer" has thrown up the usual candidates Thomson Reuters and Bloomberg. Both are genuine candidates. But it's German media giant Axel Springer which publishes titles like Bild and Die Welt that's thought to be thrashing out an offer with Pearson chiefs.

Valuing the newspaper business, which also includes a 50% stake in The Economist and magazine titles like Investors Chronicle, is interesting. Talk is the eventual buyer will have to stump up as much as £1 billion.

For that they'll get a business which grew circulation by 10% in 2014 to a record of almost 720,000 across print and online. Importantly, digital subscriptions now represent 70% of revenue. Adjusted operating profit at the Professional division in which the FT sits surged to £106 million on sales of £1.15 billion.

Results

We may get more information in Friday's half-year results presentation.

If not, investors are likely to be particularly interested in an update on trading conditions/lead indicators like college enrolments, and progress in contract renewals in the North America, says Westhouse Securities at Roddy Davidson.

"Pearson's stock has underperformed the market over a three-month view, taking it close to our 1,185p target price," adds the analyst.

"That said, we remain cautious and believe the risk to our forecasts is on the downside, reflecting a muted trading outlook, the likelihood that evolution of the global learning market from traditional to digital delivery will prove complex, protracted and create genuine execution challenges risk, and the uncertainties highlighted above."

Despite the recent de-rating, Pearson shares are still trading on over 16 times forward earnings. Not cheap, although a knockout offer for the FT could tickle the share price higher.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.