Nikkei’s surprising purchase of the Financial Times

SPIRITS were high at the prestigious Imperial Hotel in Tokyo on July 24th as the top brass of Nikkei, Japan’s largest media company, gathered before local newspapermen to broadcast their purchase of the Financial Times. “I don’t have the skill to read it but I do gaze upon it,” declared Tsuneo Kita, Nikkei’s chairman. Many big, global names in journalism have at one time or another been outed as imminent buyers for the paper, but never that of Nikkei, which remains relatively unknown in the West. On July 23^rd the FT Group’s current owner, Pearson, a British education and media conglomerate, said it would sell the paper to Nikkei for £844m ($1.3 billion). Nikkei narrowly beat Germany’s Axel Springer, a more diversified media group.

In kinder times for newspapers, Marjorie Scardino, a former chief executive of Pearson, said the FT would be sold “over my dead body”. For nearly 60 years the FT has added excitement to Pearson’s more stolid education businesses, and been a potent calling card in countries ready for business expansion, such as America, Brazil and China. The current boss, John Fallon, said the prompt for selling the paper was the growth of mobile and social media platforms which had brought an “inflection point” in the media world. A better home for the FT would be a global, digital news company such as Nikkei, he said.

Yet it is by buying the FT that Nikkei, which for now remains a highly domestic company focused almost exclusively on the Japanese market, will stake its claim to global reach. Its Nihon Keizai Shimbun is the largest business newspaper in Japan, yet the firm is probably best known outside for publishing the Nikkei 225 share index. It has long sought to parlay the newspaper’s domestic dominance of business news into an international presence, with little success. In 2013 it began publishing an English-language magazine, the Nikkei Asian Review, but it has struggled. Nikkei doubtless now also sees itself as joining Japan Inc’s charge abroad—there has been a recent string of acquisitions by Japanese firms in fields as diverse as drinks firms to banking to bathroom equipment—and furthering the aims of Shinzo Abe, the prime minister, to boost Japan’s standing.

The Financial Times Group may see its own global aspirations suffer from its new association, most notably in China, where it publishes a highly respected Chinese edition of the flagship paper. The FT has managed to maintain more cordial relations with China’s hypersensitive leadership than other western publications, including the New York Times and Bloomberg, a newswire, which have investigated top figures’ personal finances. Japan’s badly strained relations with its big neighbour could hurt the group’s prospects. Nikkei, after all, is close to the Japanese corporate and political establishment, and functions as “a machine to make Japan Inc look good” says Jesper Koll, an economist in Tokyo.

The German firm, owner of the newspapers Bild and Die Welt, could have been a more neutral acquirer, but was pipped to the post in the very last hours. It now earns 70% of operating profits from digital businesses and it would have been able to bring much digital experience to the FT. In Japan, print circulations are still astonishingly high by global standards, but they are now slowly and steadily falling because of online media. Nikkei still relies chiefly on paper and ink: of 2.7m subscribers, only some 430,000 access its products digitally. The FT, with two-thirds of its 720,000 paying readers digital, is more advanced in navigating the transition.

Axel Springer was reportedly disappointed to lose the deal. In addition to being willing to pay more, Nikkei was perceived as being more likely to invest generously in the FT, says a person close to the negotiations for the sale. Nikkei is also expected to give the FT’s managers more room to run things as they see fit than the German company, which is known for its rigorous approach.

Nonetheless, the stratospherically high price Nikkei is paying for the FT Group—one that values it at 2.5 times its revenue last year, a reminder of earlier, halcyon days in the newspaper business—may limit its room to invest. The funding for the purchase will be raised chiefly through debt. The deal does not include the FT Group’s headquarters building in central London, nor its 50% share in The Economist Group, the parent of The Economist.

The government of Mr Abe was quick to hail Nikkei’s coup. Akira Amari, the economy minister, said the deal would aid more accurate reporting on what the Abe government is trying to do with the economy, a comment which is likely to have provoked unease in the FT’s newsroom. Nikkei has pledged to respect the paper’s culture, though it adheres to very different journalistic traditions, such as Japan’s system of kisha clubs, or reporters’ clubs, in which media organisations agree to restrict the access of non-affiliated journalists to government ministries and other key institutions.

Nikkei journalists themselves have a reputation for knowing everyone and everything that matters—but holding their punches on controversial stories. One former reporter, Shigeo Abe, who spent 25 years at the paper before leaving to set up Facta, a monthly investigative business magazine, says its journalists are overly timid due to their fear of legal action and losing ad revenues from the big companies they cover.

They could also lose access to the early scoops on company earnings that the Nikkei newspaper excels in, and which have recently aroused controversy, because they seem to trespass on the principle of fair market disclosure. Last year the Tokyo Stock Exchange moved to limit the leaking of market-moving information to the media. It no doubt impressed Nikkei’s top managers that the paper which highlighted the issue last year was none other than the Financial Times.