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Japan’s Nikkei buys Financial Times for £844 million

Japanese publishing group Nikkei Inc. took media circles by surprise when it agreed to acquire the 127-year old Financial Times from its British owners in a £844 million ($1.3bn) buyout deal. Publishing group Pearson, the FT’s parent company just handed over one of the world’s premier newspapers which has long been known for its distinguished pinkish hue, in the hands of a company that is little known outside its home market. The sale does not include Pearson’s 50 percent stake in the current affairs weekly The Economist. Person is also holding onto the FT’s headquarters at One Southwark Bridge in central London. The sale will allow Pearson to focus on its educational textbook and publishing business, which accounts for three-quarters of its profit.

Little known outside Japan, Nikkei, which traces its history to the mid-1800s, is Asia’s largest independent business media group. The largest acquisition ever by a Japanese media company seems to be a strategic move by Nikkei to expand its reach globally. Nikkei’s multi-platform media distribution spans online, broadcast, magazines and digital media. The group runs a flagship newspaper with the same name which has a 3 million subscriber base, TV Tokyo, English language business title Nikkei Asian Review, and finance and business news channel , Nikkei CNBC. Nikkei’s move is part of a recent wave of foreign acquisitions by Japanese firms in recent years in order to compensate for slow economic growth and a shrinking customer base at home market.

“I am extremely proud of teaming up with the Financial Times, one of the most prestigious news organizations in the world,” said Nikkei group chairman and CEO, Tsuneo Kita. “We share the same journalistic values.”

The sale has long been the subject of media speculation. Bloomberg, Reuters and German publisher Axel Springer were rumored to be interested in buying the paper. By Thursday morning, however, it seemed Germany’s Axel Springer would close the deal. The Financial Times itself reported in a news article that Axel Springer was the leading candidate. The Germans weren’t aware until 15 minutes before the deal was announced that stunned the Germany’s media powerhouse. It’s pretty clear Axel Springer lost their chance after a last minute acquisition put a line between the two bidders. Both the rival bidders were said to be looking forward to expand their English-language presence to global media markets.

Meanwhile, the price paid by Nikkei raised concerns among media industry watchers. Is $1.3 billion too much for the FT as the $5 billion Rupert Murdoch paid for Dow Jones in 2007? Not to mention, it dwarfs the $250 million what Amazon founder Jeff Bezos paid for The Washington Post, one of country’s most influential and prestigious daily newspapers. The Boston Globe newspaper was sold to Red Sox owner John Henry for $70 million in cash, a fraction of the $1.1 billion the New York Times Co. paid for it in 1993.

The Financial Times was founded in 1884 and has been owned by Pearson for almost 60 years. The paid print and digital circulation at the FT had grown by 30 percent over the past five years to 737,000, with digital circulation growing to represent 70 percent of the total and mobile driving almost half of all incoming digital traffic. The FT group had generated sales of £334 million ($518 million) in 2014, and made an operating profit of £24 million ($37 million). Given that The Economist, which isn’t going to Nikkei under the deal contributed some of that profit, it’s easy to figure out $30 million of actual FT operating income. According to reports, FT has tripled its profits in 2014 over 2013, so may be that little transformation will now help Nikkei build a bigger business in the coming years, further justifying the price it paid.