Nikkei Stirs Global Media Waters in Acquiring the Financial TimesEconomy
Nikkei Inc., the publisher of the country’s leading business newspaper, announced in July it was purchasing time-honored British publication the Financial Times. The acquisition marks the first time for a Japanese company to take over a foreign media operation. Nikkei now joins leading European and US media companies in turning to acquisitions and corporate restructurings to meet the challenges of the digital age.
Largest Acquisition by a Japanese Media Company
The Financial Times, published on distinctive salmon-pink newsprint, has dominated the City, London’s financial district, for 127 years. News that Nikkei was buying the FT sent huge shock waves throughout the world. The purchase price of ¥160 billion is steep compared to other recent media acquisitions; particularly in light of reports that the London headquarters of the FT Group and its 50% stake in The Economist magazine are not included in the deal.
Nikkei Chairman Kita Tsuneo and President Okada Naotoshi announced the agreement to purchase the FT on July 24 in Tokyo. The acquisition will allow the two news organizations to draw on each other’s strengths and enable Nikkei to expand its digital strategy on a global basis. Online formats are becoming the norm and economic and business information is an area where high growth is anticipated. The deal combines the FT and Nikkei customer bases, opening the door to a range of digital business opportunities.
A Financial Newspaper on Par with the Wall Street Journal
The FT recorded sales of $519 million (¥64.2 billion) in 2014 and has a circulation of 737,000, of which 500,000, or 70%, are digital subscriptions. While circulation is on par with Japanese regional newspapers, the publication has enormous influence as a global leader in financial news, enjoying brand strength on par with the Wall Street Journal. It has also been heralded for quickly and successfully transitioning its business in response to the industry’s shift to digital.
Despite such success, Pearson, the long-time parent company of the FT, has begun to redirect its business strategy. As a multimedia company, Pearson offers English language testing and publishes reference works. It has seen its earnings stagnate in recent years and in response, the company has just completed a two-year restructuring program. The decision to sell the FT and focus on its education business, which accounts for three-fourths of earnings, was part of this process.
Pearson CEO John Fallon explained the sale of the FT, saying, “We’ve reached an inflection point in media . . . . [T]he best way to ensure the FT’s journalistic and commercial success is for it to be part of a global, digital news company.”
Globalization and Transition to Digital
The acquisition of the FT has the potential of transforming Nikkei into a truly global financial media company. In announcing the deal, Kita stated: “I am extremely proud of teaming up with the FT, one of the most prestigious news organizations in the world. . . .We share the same journalistic values. Together, we will strive to contribute to the development of the global economy.”
Total combined digital subscriptions for Nikkei and the FT are 930,000, second only to the 1 million of the New York Times. Print circulation will be more than double the 1.46 million of the Wall Street Journal. Nikkei will also be better able to deliver business information centering on Asia overseas, led by the English-language Nikkei Asian Review.
Okada says the acquisition strengthens the digital capacity of both organizations, providing a boost at a time when companies are competing to integrate print and online content globally. Recognizing the FT’s head start in the computer systems and customer management fields, Okada expressed a desire to learn from the publication in developing new services and advertising.
Editorial Independence and No Staff Cuts
Kita stressed Nikkei’s intention of maintaining the FT’s editorial independence, saying both organizations will grow side by side as global media companies. In respect to this, he said management and editorial leadership will remain in place, and no staff reductions will be made.
The FT enjoys a strong brand in Europe and the United States. Nikkei’s reporting centers on Asia, with the company looking to boost its coverage of leading companies in the region from 100 to 300 and using information it obtains to respond to changing needs of readers and as a platform for strengthening its print and fee-based online content.
Besting a Rival German Bidder
How was a Japanese media company suddenly able to step in and purchase an established publication like the FT? As reported in the Japanese and foreign media, German media group Axel Springer initially expressed interest and was favored to purchase the FT, repeatedly holding talks with Pearson over the course of a year. Bloomberg and Thomson Reuters also joined the bidding, followed by Nikkei.
Although Nikkei’s negotiations with Pearson began only five weeks prior to acquisition, it was the company’s cash that quickly tipped the scales in its favor. On July 23, top leaders of Pearson and Nikkei held a conference call, with Nikkei closing the deal by offering a cash payment exceeding rival bidders. As reported by the Wall Street Journal, Nikkei’s offer was too rich for financially conservative Axel Springer to match, with the German company, which had remained in negotiations right up to the end, expressing disappointment in failing to reach a deal.
Will FT Retain Independence?
By some reports, Nikkei sweetened its offer as a way to express its earnestness in acquiring the FT. Nikkei is also thought to have moved ahead of rivals by promising to preserve the paper’s long-established managerial independence.
The British media have largely viewed the purchase as an attempt by Nikkei to expand its online presence, with the Daily Telegraph making note of the company’s heavy dependence on print. The Guardian had a similar analysis, saying in an editorial: “Japanese newspaper subscribers are getting old. The habit of print is weakening. . . . It makes sense for Nikkei to spend its cash on one of the few really successful global digital brands.”
A Global Flurry of Acquisitions
Two notable trends in the global media industry are the ongoing decline of print and acquisition of newspaper companies. Deals have involved such major industry players as the Wall Street Journal publisher Dow Jones, Reuters, and the prestigious French newspaper Le Monde, as well as outside actors like Amazon founder Jeff Bezos, who purchased the Washington Post.
Recent Major Media Acquisitions
|Year||Media company||Purchaser||Purchase price|
|2007||Dow Jones & Company (US), publisher of the Wall Street Journal||Media group News Corp||¥660 billion|
|2007||Tribune Company (US), publisher of the Los Angeles Times||Private investor||¥980 billion|
|2008||Reuters Group (Britain)||Canadian financial information company Thomson Corporation||¥2.1 trillion|
|2010||Le Monde (France)||Investor group||¥12 billion|
|2011||Huffington Post (US)||Internet services company AOL||¥25 billion|
|2013||Boston Globe (US)||John W. Henry, owner of the Boston Red Sox||¥6.9 billion|
|2013||Washington Post (US)||Jeff Bezos, Amazon founder||¥24.6 billion|
|2015||Financial Times (Britain)||Nikkei||¥160 billion|
Acquisitions have largely been attempts by established media companies to address dwindling bottom lines. In the face of burgeoning digital upstarts these companies have seen circulation fall and advertising revenue slowly dry up. The online format is growing in importance not only among general readers, but also in providing fee-based economic information for companies. The appearance of new media is driving leading corporations to bolster their business strategies to provide a mix of print and digital content.
Will the FT Become a Burden for Nikkei?
Some critics have questioned whether Nikkei is paying too much for the FT. The newspaper recorded an operating profit of £24 million (¥4.6 billion) on sales of £334 million (¥64.5 billion) in 2014. This means that in acquiring the newspaper, Nikkei valued the company at 2.5 times its sales of the previous year. Nikkei will pay the ¥160 billion price tag with cash on hand and borrowings from financial institutions. Nikkei reported net assets of ¥314.7 billion in its consolidated financial statement for the fiscal year ending December 2014, bolstering the argument for some that Nikkei is making an overly expensive investment.
Nikkei and the FT have already established a close relationship, including sharing content. The buyout will enable the two entities to forge a deeper relationship through the exchange of human resources and know-how. Okada views the price as being in line with the combined asset value of the FT and the value the two companies will create going forward. While Nikkei has staked its future on globalization and digitalization, one former Nikkei employee worries that the FT will become a burden. He notes that Nikkei’s price for the FT is over half of the company’s consolidated sales of ¥300 billion. While Nikkei’s cash and deposit of ¥100 billion can help cover the cost, he explains bank financing will entail debt service obligations, which may come to weigh on operations.
Differences in Corporate Culture
Kita has been clear the two organizations share the same values, explaining: “Our motto of providing high-quality reporting on economic and other news, while maintaining fairness and impartiality, is very close to that of the FT. We share the same journalistic values.” However, some observers have raised concerns about differences in corporate culture. Nikkei has been a dominant presence in covering Japanese domestic business news, but as the Telegraph notes, it has deep ties to companies and the government, which give it special access. The New York Times points out that foreign media frequently lead Nikkei in uncovering corporate wrongdoing, such as in reporting the Olympus scandal in 2011.
A former editor of the FT stated in Forbes that “a key problem going forward will be which nation the FT speaks for. . . . Willy nilly the FT seems destined to become just another organ of Japanese power.”
Confidence in Global Opportunities
It has yet to be determined what influence the alliance will have on the media industry. Nikkei has the potential of transforming itself into a leading player in the industry if, with the support of the FT, it can strengthen its global business by boosting digital content.
Some observers view Nikkei’s purchase as a shrewd decision, citing the FT’s extensive coverage of such regions as the Middle East and Africa as well as its strength as a leading English-language newspaper—it is said to be read by such world leaders as US President Barack Obama and Russian President Vladimir Putin. Whatever the case, all eyes will be on the top industry players as they jostle to consolidate the global financial media.
Profiles of the FT and Nikkei
Financial Times: Founded in 1888. Headquartered in London. Globally influential as a specialized financial and business media company. Combined print and digital circulation of 737,000, of which 500,000, or 70%, are digital subscribers. Print editions are published in Europe, the United States, and Asia, including Japan. Group sales totaled ¥64.4 billion in 2014.
Nikkei: Founded in 1876 as Chugai Bukka Shimpo, the in-house publication of Mitsui & Co. Headquartered in Tokyo. After acquiring several financial newspapers, renamed the Nihon Keizai Shimbun in 1946. Circulation of 2.7 million for the morning edition and 1.4 million for the evening edition (as of December 2014). Began publishing an electronic edition in 2010, with paid subscribers now totaling 430,000. Sales totaled ¥300.6 billion in the fiscal year ending December 2014.(Originally written in Japanese and published on August 11, 2015. Banner photo: The FT sale reported in the FT, Nikkei, and other papers. © Tanaka Yōsuke / Aflo.)