Millbank Tower, Millbank
Pearson plc is a leading British-owned industrial holding company with interests including publishing, financial services, fine china, and oil services, and is closely associated with its founding family, the Pearsons. In its early years the business was dominated by Weetman Dickinson Pearson, later First Viscount Cowdray, who transformed it into an international contracting concern which he subsequently converted to an investment trust-type operation.
Its roots can be traced to Weetman's grandfather, Samuel Pearson, who in 1844 became an associate partner in a Huddersfield-based building and contracting firm. In 1856 his eldest son, George, entered the business, which became known as S Pearson & Son, "sanitary tube and brickmakers and contractors for local public works in and around Bradford."
Contracts undertaken at this time were locally based and were for railway companies and, more frequently, for the provision of water supply, drainage, and sewerage facilities to expanding industrial cities. The business developed rapidly, moving its head office in 1857 to nearby Bradford, Yorkshire, and expanding its associated brickmaking, glazed tile, and sanitary pipe activities. In 1873 Weetman Pearson entered the business and received a share in its ownership on the retirement of Samuel in 1879.
Pearson, increasingly under the direction of Weetman, began to make a quick metamorphosis into an internationally based concern. In the late 1870s, contracts outside the north of England were undertaken for the first time, and the head office was moved to London in 1884. Five years later projects were in progress as far afield as Egypt, the United States, Canada, and Mexico with port works, railway construction and tunneling, and water supply and drainage predominating. Between 1884 and 1914 some 67 projects, with a total value of almost £43 million, were undertaken. Of these, 36--valued at £16.5 million or 38% of the total--were located outside Great Britain and Ireland; with 10% in the United States and Canada; 45.5% in Central and South America; and 7% in Egypt, Spain, China, Malta, and Bermuda.
The British government was a major client, as were municipalities, railway and harbor companies, and water utilities. Contracts of particular note included the Admiralty Harbour at Dover; the Blackwall Tunnel under the River Thames in London; the East River Railway Tunnels, New York, for which a U.S. subsidiary, S Pearson & Son Inc., was formed to carry out the work; Malta Dry Docks and Breakwaters; and Halifax Dry Dock in Canada.
However, Mexico was the country where Pearson made its greatest mark, to the extent that Weetman Pearson, by now a member of Parliament, was dubbed in the House of Commons and elsewhere as the "Member for Mexico." The first contract for the Mexican government, which ran from 1890 to 1896, was for the construction of the Mexican Grand Canal to drain Mexico City and its surrounding area. A succession of other government-owned or sponsored projects followed--the £3 million conversion of Vera Cruz harbor into a modern seaport, the £2.5 million reconstruction of the Tehuantepec Railway and its associated terminal ports, linking the Atlantic and Pacific Oceans, and the Salina Cruz harbor and docks, at £3.3 million.
A growing confidence between Mexican dictator Porfirio Dí and Weetman Pearson consolidated Pearson's Mexican interests. Under the Tehuantepec Railway contract, Pearson built the facilities at cost, provided part of the capital, and then managed the railway and ports, taking part of the profits as remuneration. This entry into the mainstream of Mexican business soon led to other interests, most importantly oil. In 1901 Pearson began to acquire oil-bearing land and by 1906 owned 600,000 acres and had royalty leases over about another 250,000. Oil refining began, and in 1908 Pearson entered the Mexican oil retail trade in direct competition with Walter Pierce Oil Company, mostly owned by Standard Oil Company, resulting in severe price competition.
However, it was not until 1910 that the business was transformed into an international oil concern with the discovery of the Potrero de Llano oil field. The Aguila (Mexican Eagle) Oil Company Ltd. was formed to take over most of Pearson's oil interests and make a public issue of securities. In 1912, as a means of extending this business, the Eagle Oil Transport Company Ltd. and the Anglo Mexican Petroleum Company Ltd. were formed to focus on international distribution and sales. Some £12 million of Pearson capital had by now been committed to Mexican oil. During World War I an immense trade was done in supplying the British government. In 1919 the Royal Dutch group acquired a large shareholding in the Aguila and took over management control, although for many years Pearson continued to own a large part of the company. In 1919 Whitehall Petroleum Corporation Ltd. was formed to take over Pearson's oil interests and prospect--mostly unsuccessfully--for oil worldwide. Its most notable action was the establishment of the Amerada Corporation, a major U.S. oil company, in 1919.
Another feature of Pearson's diversification after 1900 was the generation, supply, and application of electric power in Latin America. This began when D&iacu;te invited Weetman Pearson to electrify and then manage the tramway system--later extended to electricity supply generally--in Vera Cruz, a service which was carried into effect by the Vera Cruz Electric Light, Power and Traction Company Ltd. Soon Pearson developed similar schemes elsewhere in Mexico. After World War I these developments were extended outside Mexico, when undertakings in Chile were acquired. The Chilean interests were subsequently modernized and managed by Pearson's Cia. Chilena de Electricidad. All these electrical interests were consolidated into Whitehall Electric Investments Ltd. in 1922.
In 1897, Pearson, which was by now reckoned to be the world's leading contractor, was converted into a limited company with an issued share capital of £1 million, all of which was owned by the Pearson family or by non-family directors. In 1907 Whitehall Securities Ltd. was formed to take over all of Pearson's non-contracting activities, while in 1919 S Pearson & Son (Contracting Department) Ltd. took over the firm's contracting interests. S Pearson & Son Ltd. became the group's holding company.
During World War I, the contracting company was preoccupied with military contracts, of which the huge munitions plant at Gretna Green in Scotland--worth £9.2 million--was the largest. However, in the late 1920s the construction business was closed down, not being sold on as a going concern apparently as a result of family whim. By now, however, Pearson had diversified well beyond the supplying of oil and electricity. In 1908 Weetman Pearson was a member of a large syndicate which acquired the London evening newspaper The Westminster Gazette. After the war he acquired total control of the newspaper, converted it into a morning daily, and began to build around it a group of provincial newspapers. In 1919 the company established Whitehall Trust Ltd. as a finance and issuing house, and at about the same time its principal asset, a substantial interest in Lazard Brothers & Company, the London merchant bank, was acquired. A partnership was formed with Dorman Long & Company Ltd. to develop a coal mining and iron and steel industry in Kent, although this project was not to figure prominently in Pearson's affairs,
When Lord Cowdray died in 1927 he had completely reshaped his family's business. He was succeeded as chairman by his second son, Clive, while his eldest son, Harold, played a significant part in the development of Westminster Press Ltd. The management philosophy was to develop and extend the core businesses through local management. In 1929 the electricity businesses in Mexico and Chile were sold, but similar electricity undertakings were developed in southwest England. The company played a substantial role in establishing British Airways Ltd.--not the state-owned business which came to be known as British Airways PLC--in 1935.
The most significant result of World War II was the purchase of strategic Pearson assets by the British government. These included the airline interests but, much more significantly, the interest in the Amerada Petroleum Corporation which was compulsorily acquired in 1941. The year 1948 saw the nationalization of the electricity undertakings in the west of England.
In the 1950s, the general strategy of Pearson, which from 1954 was under the chairmanship of the Third Lord Cowdray, was to concentrate on well-defined sectors and within them build up specialist niche businesses producing quality products, with much decision-making devolved to local management. This was to be a successful and enduring philosophy. The five legs on which the business now stood were financial services, publishing, oil, manufacturing, and investment trusts.
In 1945 the surviving oil interests were largely confined to oil and gas properties owned by Rycade Corporation of the United States. In the 1950s the activities of this company were extended, while particularly successful expansion also occurred in western Canada through Whitehall Canadian Oils Ltd. In addition, a small interest in Amerada was reacquired. Publishing was strengthened in 1957 when a substantial interest was taken in Financial News Ltd., which in turn owned a large interest in the Financial Times and a small range of quality periodicals. In 1960 the last of the overseas electricity utilities was disposed of when the business of Athens Piraeus Electricity Company, which had operated under a concession granted in 1925, was sold to the Greek state, although a smaller trolley bus operation in Athens was retained until about 1970. In manufacturing industry, a substantial interest in Acton Bolt Ltd., makers of nuts and bolts, was sold to GKN Ltd. in 1959, and another in Saunders-Roe Ltd., builder of helicopters, was sold to Westland Aircraft Company Ltd. in 1959.
In 1969, for tax and fiscal reasons, the business was converted into a quoted company and 20% of the equity was sold to the public. The company was then valued at £20 million, and profits before tax, attributable to shareholders, totaled almost £7 million. About 25% of profits came from financial services which largely consisted of Lazard Brothers & Co. Ltd., which was now almost fully owned by Pearson, and Whitehall Securities Corporation which provided services to the group. An additional 30% of profits were generated from a 51% holding in the publicly quoted S Pearson Publishers Ltd., owner of the Financial Times; Westminster Press Ltd., controller of about 60 local and provincial newspapers; and the Longman Group Ltd., a general publishing house. Oil interests in North America, which were reorganized at the end of the 1960s, provided about 20% of profits. Manufacturing, where the chief asset was a 59% interest in Standard Industrial Group Ltd., another publicly quoted company, included interests in pottery, glass, engineering, and warehousing. This contributed about 7% of profits. Finally, 15% of profits were contributed by investment trusts.
In the 1970s the North American interests of Pearson were mostly represented by the holding in Ashland Oil, held by Midhurst Corporation. This holding was slowly reduced and the proceeds used to acquire other North American interests, especially in oil exploration and production services, as part of an effort to extend Pearson's interests outside the United Kingdom and into North America. The most significant move was the acquisition of Camco Inc., supplier of services and equipment to the oil industry on a worldwide basis, in which a controlling interest had been purchased by 1979. This business was subsequently built up by acquisition. Lignum Oil Co. and Hillin Oil, involved in the acquisition and development of oil producing properties, were also acquired, but were sold in 1989 as part of a divestment of oil exploration activities which also included the sale of Whitehall Petroleum.
Financial services remained grouped around the merchant bank of Lazard Brothers in which Pearson, in 1990, had a 50% interest, reduced from 79%. This decrease followed an ownership reorganization in 1984 when, as an early response to increasing internationalization of the securities industry, Lazard of London and two other Lazard houses, in Paris and New York, became more closely linked. An exchange of ownership interests resulted in Pearson having a 10% profit interest in both these houses. Notwithstanding the acquisition in 1976 of the unowned part of Embankment Trust Ltd., investment trust and other portfolio-type investments have been decreased in order to fund acquisitions.
Pearson's interests in manufacturing are concentrated in the Doulton fine china business, which has emerged as a world leader with a strong overseas distribution network. The engineering interests were strengthened in 1980 by the acquisition of the high technology businesses of Fairey Industries Ltd., and their merging with Pearson's other engineering interests in 1982. However, these relatively minor activities were disposed of in 1986 as part of group policy to focus more on core activities. Similarly, involvement in the manufacture of specialist glass, which had expanded rapidly in the 1970s, was terminated in 1982 with the sale of Doulton Glass Industries Ltd.
The minority interest in Pearson Longman Ltd. was acquired in 1982. Publishing, the division of Pearson with the highest proportion of profits, embraces financial publications including not just the Financial times--the world's leading financial newspaper--but also a host of important financial periodicals, including The Economist, in which Pearson has a 50% interest, and the Investor's Chronicle, as well as on-line electronic publications. Longman by acquisition and organic expansion, has emerged as a major publisher of professional, educational, medical, and general reference publications. Penguin holds a strong international position in publishing both soft- and hard-back fiction and expanded its operations through the acquisition, among others, of Viking of the United States and the Michael Joseph and Hamish Hamilton publishing houses in 1985. Westminster Press expanded into newspapers distributed free of charge and disposed of several newspapers paid for by readers, as it concentrated resources in areas where it was a clear market leader. In 1987 the acquisition of Addison Wesley of the United States, with a strong schools and college list, confirmed Pearson as a major international publishing group. The global holdings increased in 1988 by a share swap with Elsevier, a leading Dutch publishing company, and through the acquisition of the French Les Echos Group. The swap with Elsevier was undone in 1991, when the two companies were unable to devise merger terms acceptable to all parties.
One new interest, since the mid-1980s linked to the publishing division, has been expansion into daytime family entertainment. Although Pearson had owned Chessington Zoo for many years, this area was fully established through the acquisition of Madame Tussauds in 1978. Since then a number of acquisitions have been made and developed, virtually all U.K. based. Further developments in this general sector included the acquisition of a 25% holding in Yorkshire Television Ltd. in 1981, and a less than successful involvement, now terminated, in filmmaking.
While Pearson's shares have become much more widely held, the Pearson family continues to hold a large--but not controlling--share of the equity. The Third Lord Cowdray retired from the chairmanship in 1977 and was succeeded by Lord Gibson and then by Lord Blakenham in 1983, both of whom were family members. The company's name was changed to Pearson plc in 1984. In the early 1990s it can claim to be one of the most successful British-based companies.
Principal Subsidiaries: Addison-Wesley Publishing Co. Ltd. (U.S.A.); Camco Inc. (USA); Les Echos SA (France); Financial Times Group Ltd. (U.K.); Longman Group Ltd. (U.K.); Pearson Inc.,(U.S.A.); The Penguin Publishing Co. Ltd. (U.K.); Penguin Books U.S.A. Inc; Royal Doulton Ltd. (U.K.); The Tussauds Group Ltd. (U.K.); Westminster Press Ltd. (U.K.).