Will Pearson (PSO) Buy Dow Jones (DJ)?

At the risk of stating the obvious, Dow Jones (DJ) needs a way out. Its shares were moving along in the low $30s until News Corp (NWS) offered $60.  If the controlling Bancroft family turns down the News Corp offer, the shares head back to their old territory. To make matters worse, Dow Jones business, especially its Newswire operations, are likely to face stronger competition from a merged Reuters (RTRSY) and Thomson (TOC).

With Reuters and Thomson married, most of the logical buyers for Dow Jones are gone. That is with the possible exception of Pearson (PSO) which owns The Financial Times. The Financial Times owns 50% of one of the world’s most respected magazines–The Economist. Pearson also owns a majority interest in Interactive Data Corp (IDC) which provides financial market data, analytics, and related services to financial institutions, active traders, and individual investors.

Pearson was founded in 1844, and has many of the same values as Dow Jones. The company describes its operating philosophy this way: Our products, customers and technologies are changing fast but some things in Pearson stay the same. "In everything we do, we aspire to be brave, imaginative and decent."

A look at Pearson shows that it is pretty well-run. Revenue in 2006 was $8.1 billion and operating profits was $1.1 billion. The company is growing.

Pearson has a market cap of $14.4 billion. Even at a $60 valuation, Dow Jones cap is below $5 billion.

A merger with Pearson would give the controlling shareholders at DJ a way out the would not require them  to sell the company to someone whose values they dislike. Mr. Murdoch is just not high brow enough for them. And, Pearson has the experience of owning a highly independent editorial property in The Financial Times.

Whether Pearson would be game to takeover Dow Jones is unknown. But, it is not helped by the Reuters tie up with Thomson. Owning Dow Jones is a chance to get bigger by picking up a company with similar DNA.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.