Japanese publishing giant Nikkei has bet the farm on using the Financial Times to make it become a global business media player.
The UK-based publisher instantly gives Nikkei a global footprint and an internationally recognised brand.
In print terms, Nikkei’s flagship Nihon Keizai Shimbun (Japan Economic Newspaper) dwarfs the FT. It has around 2.7m daily sales versus the FT’s global print circulation of just over 200,000.
Print newspaper circulations are still huge in Japan and declining at a slower rate than in the US and Europe. This is partly due to a cultural quirk that sees most households take home-delivered national newspapers.
But print is in long-term decline in Japan nonetheless. And Nikkei realises that if it is to have a long-term future and grow its business it must become a global digital player.
It is difficult to see how it could have achieved that on its own. By purchasing the FT it can make that leap overnight.
In digital terms, the deal is more a marriage of equals.
Whereas the FT has 520,000 digital subscribers spread out around the world Nikkei has 430,000 paid online readers based largely in Japan.
Last year Nikkei made profits of £53m on turnover of £1.6bn. So paying £844m for the FT is a huge gamble – representing 16 years of net profits.
FT Group (excluding the 50 per cent share of The Economist not included in the deal) made turnover last year of £334m and profit of £24m.
A purchase price of 35 times annual profits means Nikkei has paid a huge premium for the kudos of the FT brand and the strategic advantages it thinks it can draw from the deal.
Nikkei launched the Nikkei Asian Review, a weekly magazine which makes content available in English in, 2008.
An article on that title's website says: "Nikkei Inc. hopes to leverage the two companies' complementary geographical strengths and better respond to the challenges facing global media, including globalisation and the transition to the internet…
"The FT, whose strength lies in the US and Europe, complements the Asia-focused Nikkei. By acquiring the FT, a strong brand among Anglosphere readers, the Japanese company hopes to strengthen its footing in the market for Asian business news."
The big question is whether Nikkei can derive enough leverage from the merged group to justify that huge £844m purchase price and recoup its investment. Because if it can't justify that outlay through increased growth it could have to increase FT profits by cutting costs.