Shares in Pearson (PSON) climbed up as much as 13 per cent on 12 June, following the news that active investment manager Cevian Capital had bought a 5.4 per cent stake in the publisher and said that it expected a new chief executive with a “clear track-record of shareholder-value creation” to realise the company’s “full potential”.
The Swedish firm’s managing partner and co-founder Christer Gardell said in a statement: “We have followed Pearson closely for several years...Based on our analysis, we see no reason Pearson’s businesses shouldn’t outperform their competitors, and produce attractive, growing and predictable returns.”
The publisher has been undergoing a difficult transition from a print to digital business, and has grappled with a number of profit warnings during the watch of outgoing chief executive John Fallon. Its shares are down 13.6 per cent since the beginning of the year and have more than halved since Mr Fallon began his tenure in 2013.
“People are hoping that Cevian will push Pearson to do things that will create value, whether that’s a break up or more cost cutting. Whether that’s achievable is a separate question and whether a new CEO would want to do that is a separate question.” says Sarah Simon, analyst at Berenberg. Ms Simon points out that the company has been pulling back expenses for years, with three major cost-cutting rounds. “They benchmarked themselves and they think that they are right up there and that there isn’t another big wave of cutting to be done.”
