Competition to buy the prestige title is intense – with Murdoch still capable of challenging the two business news titans

The big worry among rich men has been that Marjorie Scardino, the long-time chief of Pearson, was going to try to circumvent the company's retirement policy and stay on in her job – which would have meant that the Financial Times, which she has long refused to sell, would stay out of reach.

But she's decided to accede to the inevitable, and now, by common assumption, the FT, the publication rich men love most, will soon be on the market.

Why do rich men love the FT? Perhaps because its salmon color so distinctly identifies men of common interests and aspirations; or because its Britishness suggests a further class consciousness and, too, because among all business publications, it really is the liveliest read. At any rate, they like it so much that even though it is a newspaper – as doomed as any other – there is an intense competition among the super rich to own it. (What's more, the FT Group comes with a 50% interest in the Economist, the next most favorite publication of would-be mandarins and the wealthy.)

There may be as many as 50 men in the world, including Russian oligarchs, Chinese billionaires and South American kingpins, who could spend a billion bucks – and the FT Group may go for as high as twice that – on something contrary to their economic interests. But Pearson can't just sell to the hoi polloi super rich. It needs a qualified buyer – someone with a legitimate business interest along with mere ego and a desire for influence. And that probably comes down to Michael Bloomberg of Bloomberg LP (he could, also, do this deal personally), David Thomson of Thomson Reuters and Rupert Murdoch of News Corp.

Each of these men, and their companies, have made repeated demonstrations of their interest. Most recently, Bloomberg and Thomson Reuters have been hat in hand to Pearson, while Murdoch's legal troubles, as well as his over-investment in newspapers, have kept him sidelined.

Scardino has continued to hold the line against the sale, but her radical refocusing of the company on the education market is what makes the sale inevitable. Hence, the company's institutional forces, seeing beyond her and her sentimental attachment to the FT, have been keeping channels of communication open, even gently encouraging the conversation with potential FT buyers.

Bloomberg and Thomson Reuters are direct competitors, the leaders in selling financial and other business data, and each one would loathe to see the other get such a major financial brand. Indeed, part of their own shadow negotiation is an implicit assumption that one would get the FT, and the other the Wall Street Journal when Rupert Murdoch departs this veil of tears and his company's love of newspapers ends.

But News Corp's recent decision to split the company into two, one focused on entertainment and the other on newspapers, might mean that the Murdoch papers, including the WSJ, could live on well after him – or at least be ensnared in a more long-term corporate fate.

Hence, the competition for the FT has recently become much sharper between Bloomberg and Thomson.

Curiously, the Scardino resistance almost seems like a sales strategy: move each of the two buyers ever closer, and then push them away. Most recently, Thomson has been the preferred buyer for what's not been for sale, with Bloomberg less favored and, hence, more determined.

Both companies are now so much in a dither of must-have anticipation that the FT could fetch the kind of premium price not seen since Rupert Murdoch bought the Wall Street Journal in 2007. And that prospective price discounts Murdoch's own interest, which it should not.

Murdoch has often obsessed, in the greatest detail, over how it might affect the Wall Street Journal if Bloomberg were to buy the FT (and also, if Bloomberg were to buy the New York Times). One of the bitterest aspects of the British phone-hacking scandal, together with the crumbling of the newspaper business, is that Murdoch can no longer credibly indulge in his passionate strategizing for how the newspaper world might, in some geopolitical cataclysm, realign itself – with Murdoch always ending up as Napoleon.

But Scardino's departure suddenly gives him new wherewithal. While he probably could not buy the FT itself – as compliant as his board is, it's not going to let him overpay for another newspaper – Murdoch could quite strategically buy Pearson in its entirety. C-suite transitions create such opportunities.

It solves many problems for him. His new newspaper company needs a better business engine than plain newspapers. Murdoch's education initiative, led by Joel Klein, the former New York Schools chancellor, has been put into this new company. But this, too, has been a challenged business because local governments don't want to do business with a tainted Murdoch. But if he suddenly bought one of the largest education-focused companies in the world, he'd have a dynamic education business, and – to boot – would have a business that could help support his newspapers. What's more, News Corp's book publisher, HarperCollins, would be in this new company where it could be combined with Penguin, Pearson's book publisher. Books may be a bad business, but a better one if you monopolize it.

And, have I said, he'd own the FT, too? Voilà!

Now this may seem incredibly ass-backwards, but that's a Rupert formula. Once, he almost bought General Motors so that he could get DirecTV, its satellite television business. He also once contemplated buying the 20% of Bloomberg then owned by Merrill Lynch, precisely because he hoped that would keep Michael Bloomberg from buying the FT.

Gentlemen, make your move.

Talks over a Penguin-Random House consolidation are driven by the big tech giants – and more publishers are likely to follow

A merger of Random House and Penguin would create a £2.5bn trade publisher – by some distance the biggest ever seen. Authors such as E L James, Salman Rushdie, John le Carre, Pippa Middleton, and Jamie Oliver may become bedfellows. No wonder agents and authors are using words like "scary" and "sad" in reaction to the news.

But this is a consolidation driven not by authors, but by big tech giants, such as Amazon, and Apple, on whose platforms book publishers must now play.

Even at that size the "House of the Random Penguin" (as it must surely be known) would be a squib compared to those companies – 6% the size of Amazon, 8% of Google, and just 2% of Apple – but at least it might get a voice in the background, perhaps even a seat at the table.

There has been talk of consolidation at the top of consumer publishing for a number of years now. Some believe the over the next decade the so-called "big six" publishers – in addition to "Pengdom", the list includes Hachette, Macmillan, Simon & Schuster, and HarperCollins – will slowly be whittled down into the "top two".

But mega-mergers in trade publishing have been on hold since 2006, when Hachette bought Time Warner's consumer book publishing business. Since then the big houses have been dancing around each other without ever quite coming close enough to begin talking dowries. The surprise here is not the talks, but those doing the talking. This may be a marriage of convenience, but shotguns were not involved: Random House is already the biggest trade publisher in the US and in the UK, thanks to the huge success of Fifty Shades, it is also back in the top spot. Penguin is somewhat smaller in both markets, but its brand is huge. Both are backed by huge media groups, RH by the German giant Bertelsmann, and Penguin by Pearson, the owner of education publisher Pearson Education, and of course the Financial Times (which broke the news of these talks on Thursday).

The theory is surely that by putting Bertelsmann's corporate engine inside Penguin's Rolls Royce body, a vehicle can be manufactured that will race up the digital autobahns, while also appealing to consumers. Publishers are making a decent fist of "getting digital", but is the big tech groups that control the routes to the end user. Random House's Clockwork Orange app, and Penguin's forthcoming Diary of Anne Frank app, show businesses that are evolving how they use their content skills in this space, but it is Apple that will decide the release date of the apps, not the publishers. Similarly, Amazon controls 90% of the ebook market in the UK, and close to 40% of sales of all books. Fall foul of negotiations with the Seattle giant and buy buttons will be turned off. And if you are not selling ebooks through Amazon, then you are not selling ebooks at all. Publishers desperately need leverage, and they need money to build alternative platforms. Since the US Department of Justice – which earlier this year sued the big US publishers over colluding to bring in fixed ebook prices – has effectively ended collaboration, consolidation remains the only option.

The worry for authors, agents, and smaller bookshop chains such as Waterstones, is that Penguin House would have too great a market share of consumer book sales: with judicious pruning this share might be taken down below the 25% threshold meaning the Competition Commission could nod it through. But in reality, in literary and commercial fiction, their hold would be bigger, and fearsome. The duo account for six titles in this week's mass-market fiction top 10 alone.

But those fears look misplaced (at least in the wider context). Even within the larger publishers, such as Hachette, or Random House, individual imprints of the stature of Jonathan Cape, John Murray, and Michael Joseph would bid against each other. It is naive to imagine that the big groups don't set ceilings, but in truth advances are being driven down by fears over the future of high street bookshops and the shift to digital, not by consolidation at the top. The publishing world is also kept honest by those smaller independent publishers, such as Profile Books, often run by individuals discarded by the big groups. A publishing deal is still a relationship between one editor, one agent, and one author. The essence of this won't change.

The Competition Commission could yet have a role to play, particularly if it chose to investigate the book market more widely, as many hoped it would do when Amazon bought The Book Depository in 2011. But it would need to get the details straight – in a way it lamentably failed to do when it nodded that acquisition through, despite a chorus of complaint from publishers and booksellers.

Make no mistake, this is a huge deal, long on implication for many in the publishing business, and a shape of things to come. But the giants in the book business are no longer the publishers, whatever their sleeping arrangements.

Concerns over Amazon's power underlie plan to create £2.6bn super-publisher – yet industry is relatively healthy

Fear of Amazon may not yet be a phrase in the dictionary, but it is the sentiment that underlies the proposed merger between Random House and Penguin, to create a super-publisher with worldwide revenues of £2.6bn. Yet, the curiosity is that for all the underlying worry, the book industry remains far healthier than other media segments battered by the digital revolution.

Ebook sales are lifting off – helped not least by discreet readers of Random House's Fifty Shades of Grey trilogy – and in the first half of this year soared by 89% to £145m in the UK. Printed books, meanwhile, were only slightly affected, dipping by just 0.4% in value to £982m – meaning that, taken together, the books market in Britain at least was up 6% between January and June 2012.

That contrasts sharply with the declines seen in the music business in the UK and globally that have seen the industry gradually shrink from six music majors in the 1990s to the three today. But with Amazon dominating 90% of the ebook market, publishers believe they need sheer size to maintain their position in a business where technology and commercial relationships are changing fast – already shown by the demise of high-street chains Borders and more than 2,000 bookstores since 2005.

David Roche, the former chief executive of Borders UK, says the merger is justified simply because "it is very important to have healthy publishers – because they do the work of selection, editing for readers". He believes, also, that if Pearson, Penguin's British owner, is not fully committed to the business, then "actually, it's better off" as a minority part of an enlarged group controlled by Bertelsmann-owned Random House.

Book publishers are also eager to gain some power over setting consumer prices, switching in Europe (but not in the US) to an "agency model" in digital where they – rather than Amazon – choose what to charge, in return for handing over a fixed percentage at or around 30% to the digital retailer. That compares to the traditional model, where publishers charge a trade price, leaving it to the retailers to choose how to charge and discount.

The move to agency-selling with one less major player reduces cut-throat competition between hoped for bestsellers in the runup to Christmas, for example, and could help sustain higher prices – although it is precisely these sort of notions that trouble competition watchdogs. At the same time, if publishers felt the need to become their own retailers, the Penguin brand, in Britain at least, is arguably the best known to consumers, and could be a place to start.

Agents and authors are already calling "scary" the prospect of a transatlantic publisher housing – as well as EL James – Salman Rushdie, John le Carré, Pippa Middleton, Richard Scarry and Jamie Oliver.

But Roche also argues that there is "far more change to come" in the books business, reflecting an underlying industry nervousness. Pearson sources, seeking to justify the deal, point also to emerging competition from self-publishing – once considered a vanity activity. In July, the British group bought Author Solutions, a US-based self-publisher, for $116m (£72m) – to gain a foothold in generating revenues from a sector that grew by 60% to reach 211,000 titles in 2011, according to figures from Bowker, the US books market researcher.

The result of a combination between the businesses is that Penguin, founded in 1935 to offer the public quality affordable books, would end up as about 40% of the proposed group assuming it was structured as a nil-cash merger, according to Deutsche Bank analysts. Random House gained profits of £161m against Penguin's £111m last year, although the larger company was already flattered by the sales of EL James's sado-masochistic phenomenon.

However, with Universal Music's takeover of EMI setting a new 30%-plus bar for market share acceptability, the book combination looks unlikely to unsettle regulators. This is a point likely not lost on Thomas Rabe, the Bertelsmann CEO who is a veteran of the German group's music industry mergers – the surprise deal that led to the creation of Simon Cowell's employer, Sony BMG. He will hope too that Pearson and Bertelsmann can reach a better consensus on who to run the company: the music joint venture was hurt by arguments between its shareholders until Sony bought Bertelsmann out.

On the evidence of the first nine months of 2012, Random House, currently top, and Penguin, at number three, would have a combined share of 31.4%, although 4% of this is probably accounted for by the Fifty Shades effect alone. In the US, the two, ranked first and second, achieved 29.4% in the same period, according to Nielsen Bookscan.

Significantly, the merger proposal, described as quite advanced, comes as Dame Majorie Scardino enters her final months as Pearson CEO. She was always personally engaged, approving some of Penguin's largest advances, even if Pearson is principally an educational publisher today. But it is not certain whether she will be allowed to conclude the deal smoothly: over at the News Corp-owned HarperCollins, executives are openly wondering if Rupert Murdoch will make a counter move.

Random House owner Bertelsmann will own 53% and Penguin owner Pearson will retain 47% of world's biggest book publisher

The owners of Penguin and Random House have announced a deal to merge their publishing arms to create the world's biggest book publisher.

Bertelsmann, which owns Random House, will own 53% of the newly created group and Random House boss Markus Dohle will be chief executive. Penguin's owner Pearson will retain 47%, with its man John Mackinson, currently chairman and chief executive of Penguin, stepping up as chairman of the joint venture, which will be called Penguin Random House.

The announcement scuppers the hopes of Rupert Murdoch's News Corporation to crash the merger plans. Reports over the weekend suggested News Corp's publishing arm, HarperCollins, could put a £1bn bid for Penguin to the board of Pearson this week.

Random House has annual sales of £1.5bn, while Penguin sales topped £1bn last year. The combined group will publish 25% of all books sold in the UK from authors as diverse as TV chef Jamie Oliver, Fifty Shades of Grey author EL James and diver Tom Daley.

The combined market share of the two book publishers means the deal is expected to face an inquiry from the competition commission. Analysts, however, suggest it is likely to be waved through as regulators allowed the music industry to be consolidated down to just three big players. The companies expect to complete the deal in the second half of next year, if they win the approval from the regulators.

Bertelsmann chairman and chief executive Thomas Rabe said the merger would advance the group's digital transformation and increase its presence in Brazil, India and China.

Pearson's chief executive, Marjorie Scardino, said: "Together, the two publishers will be able to share a large part of their costs, to invest more for their author and reader constituencies and to be more adventurous in trying new models in this exciting, fast-moving world of digital books and digital readers."

The announcement comes just weeks after Scardino announced her intention to stand down after 15 years at the helm. Her exit sparked speculation that the Financial Times could be sold, as she had vowed that would only happen "over my dead body".

Book publisher which is merging with Random House reported 2% drop over first nine months of the year, despite ebook gains

Pearson's confirmation that it is offloading Penguin comes as it revealed that the book publisher's revenues declined 2% in the first nine months of 2012, despite healthy growth in its ebook business.

The company confirmed on Monday that Penguin is to be merged into a new joint venture with Bertelsmann-owned rival Random House to create the world's biggest book publisher.

Bertelsmann will own 53% of the newly created group and Random House boss Markus Dohle will be chief executive. Penguin's owner Pearson will retain 47%, with John Makinson, currently chairman and chief executive of Penguin, stepping up as chairman of the joint venture, which will be called Penguin Random House.

Pearson also revealed in an interim management statement on Monday that Penguin revenues shrank 2% in the first nine months of 2012, despite a 35% year-on-year boost in ebook sales in the third quarter.

The company's education operation, which accounts for about 75% of Pearson's business, also reported declining revenues. Pearson's share price was down slightly, by 0.8% or 10p, to £12.21 at 11am on Monday.

Key titles for Penguin include Jamie Oliver's 15 Minute Meals and Ken Follett's Winter of the World.

The revenue decline is an improvement on Penguin's performance in the first half of the year, when sales slumped by 4% year on year, due in part to the success of EL James's Fifty Shades of Grey, which is published by Random House-owned Vintage Books.

Pearson confirmed its full year financial guidance to investors of adjusted earnings per share to be about 84.9p, however, Monday's update revealed that performance across its businesses was mixed.

Overall, Pearson reported flat underlying revenues in the first nine months, as operating profit fell 5% year on year

The company said operating profits were down due to the loss of income from FTSE International. Pearson sold its 50% stake in the index last year.

"We have confidently reiterated our guidance because many of our businesses are going strong in this complicated trading environment," said Dame Majorie Scardino, outgoing chief executive of Pearson. "But the dynamics of the markets we're in could make that achievement more about resilience than flamboyance."

The Pearson-owned Financial Times grew underlying revenues by 7% in the first nine months of the year.

FT Group, which publishes the FT and houses the company's 50% stake in the Economist, said that digital subscriptions to the FT grew 17% year on year in the first nine months to 313,000.

The FT Group as a whole grew underlying revenues by 7% year on year for the period, although Pearson noted that advertising "remains weak and short-term".

Pearson's flagship education businesses, which account for 75% of group revenues, slowed.

North American education revenue fell 3% year on year on an underlying basis, professional education dived 12% and international education grew 6%.

All three education divisions slowed compared to the revenue performance reported in the first six months of the year.

"The fourth quarter is always a key selling season in education and consumer publishing," said Pearson. "We expect market conditions to remain tough, but we believe we can sustain our solid third-quarter trading momentum."

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John Makinson says transaction has been signed and publisher could not accept cash offer from Rupert Murdoch's HarperCollins

Penguin's chief executive has ruled out accepting a counterbid from Rupert Murdoch's News Corporation, which owns rival publisher HarperCollins, saying that its venture with Bertelsmann's Random House is a done deal.

Murdoch is understood to have made a "very general approach" to Pearson when the deal with Bertelsmann was already close to being signed.

However, Pearson is understood to have believed an offer from News Corporation to buy Penguin outright would not have been financially viable.

John Makinson, who will take the role of executive chairman of the board of the new Penguin Random House, dismissed the chances of News Corp derailing the deal by making a cash offer for Penguin.

"There isn't any sort of break clause [with Bertelsmann]," he said. "It is a signed transaction." The Penguin chief said that the board of Pearson had "exhaustively examined" all options for the business before settling on the Bertelsmann deal.

He did not directly deny the question of whether this process included having previously held talks with News Corp or HarperCollins. "I'm not talking too much about that," he said. "I don't think we should talk about that, that should be something you ask Pearson."

About two-thirds of Penguin's business is in the US, meaning any deal with News Corp would have triggered huge capital gains tax liabilities.

This means that Murdoch, or any bidder looking to buy Penguin outright, would have had to have paid an extremely price to make it worthwhile for Pearson – significantly over £1bn.

It is not now possible for Murdoch to derail the Bertelsmann deal with a blockbuster offer to shareholders, as the joint venture plan does not require approval by Pearson investors.

The deal does not qualify as a class one transaction according to UK listing authority rules on tests relating to market capitalisation and profits.

Makinson dismissed concerns that creating a global book powerhouse – Penguin Random House will have combined revenues of £2.4bn – will threaten the independent publishers and vibrancy in the book market.

"There will be a high degree of separation and autonomy and continuity in the [existing] editorial structures of the two companies," he said. "From the perspective of a reader, author or agent there won't be very much change in the day-to-day operations of the companies."

He also said the strategy behind the deal was not to take an axe to the editorial side of the business, but that there could be savings to be had in the back office.

"This is not consolidation being driven by financial cost arithmetic," he said. "In the back end sure, a lot of savings can be achieved in procurement and technology investment."

He said that the deal was driven by a need to successfully transform the Penguin and Random House businesses to a world of ebooks, and maintain strength in the face of ever-strengthening online players such as Amazon.

"We are all worried as the world moves to a more digital structure for content and distribution, that publishing could diminish, fewer books be published and fewer risks taken," he said. "We hope to be able to offer more to readers and authors. This [deal] will give us resources, capacity and confidence to publish a broad array [of content] and to take risks, that is what good publishing is about."

Makinson said he expected to spend more time in New York, where he says he believes the headquarters of the new venture will be based, as well as London.

Random House's Markus Dohle has been appointed a chairman and chief executive of the new venture, with Bertelsmann holding five board seats, Pearson four.

Makinson said that the decision to strike a deal with Bertelsmann – talks started five months ago – was undertaken with the unanimous backing of the Pearson board.

"It has been a very thorough process," he said. "The board of Pearson examined [every option] exhaustively. There was a great deal of analysis of all options available to Penguin. We looked at selling, merging, buying, running it differently within Pearson. We concluded this was the best option for Pearson's shareholders and the publishing industry."

Makinson dismissed the view of some analysts that Penguin Random House is likely to run into regulatory issues. "I don't think our combined market share will trigger the need for disposals – 30% is an important number," he said, referring to the acceptable market share bar set by Universal Music's takeover of EMI.

"We don't expect to be north of 30%," he added. "In the round we expect to meet the regulatory criteria." He said that in a few "small discrete markets" there may be a need to "have a discussion". However, his legal advice indicates no need for significant disposals in major markets, he added.

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Bertelsmann and Pearson were quick to finalise the merger between the publishers, but did they need the deal?

Bertelsmann and Pearson didn't waste much time, in concluding their – can one say encylopedic? – merger talks to unite Random House and Penguin. Random House may publish the Fifty Shades trilogy, but a glance at the terms – 53% for Bertelsmann – reveals who had the whip hand: Pearson.

Average company profits for the past five years are £132m for Random House; £94m for Penguin and its classics, says Deutsche Bank – implying a fair share of 58% for Random House, also home to Dan Brown, and the Great British Bake Off series.

No doubt the deal was finally cooked last night; certainly Pearson was able to point out that Rupert Murdoch was hovering, although the British company has been preparing for five months. That said, anybody who has looked at the books will know a full buy-out of Penguin would trigger substantial tax liabilities in the US. Dame Marjorie Scardino of Pearson is also not obviously incentivised to help News Corp bulk up in publishing, because Murdoch's company contains the Wall Street Journal, ancient competitor of the FT.

It is not at all obvious that either Penguin or Random House needs a deal, however wide is the Amazon that currently divides them. But when in doubt, being big has its merits. Neither party can quantify synergies either, officially because it's a complicated to work out which warehouse may stay and go. Sceptics, say the truth is that there are very few, and argue that there is a risk that executives will be distracted fighting, and not trying to reinvent publishing. The history of joint ventures is very mixed after all.

Pearson at least gets a partial exit, deconsolidates the slow-growth Penguin and investors can focus on its faster growing education business. Meanwhile, Thomas Rabe, who has run Bertelsmann for a year, needed a deal. Rabe, the Financial Times reported in September, told colleagues that the company "does not have all the skills required for the digital age" and suffers from "low growth and low potential". It's not obvious a merger in books helps, but perhaps some people like to have the biggest library.

In this chaotic world, only the boldest would forecast the impact of the Random House–Penguin merger

The merger between two of the UK's biggest publishing houses, Penguin and Random House, is expected to give them at least a quarter of the market in non-digital book sales. It won't be quite enough to attract the scrutiny of the Office of Fair Trading but that doesn't mean there's no frisson of alarm in the already anxious publishing world. The consolidation will give Random House's German owner, Bertelsmann, 53% of the joint business, to Penguin owner Pearson's 47%. The question is whether it is a predatory strike – or a survival strategy that would free up cash to invest in the new territory of e-publishing.

On the surface the book trade is as tumultuous as the seas off New York. But there are some unexpected constants. In the first six months of this year, ebook sales grew by 188% over the previous January-June, but overall sales of non-digital books are declining only slowly. When a product is cheap and readily accessible, people really do buy more of it. So far, the most obvious victims of the revolution are the bookshops, which struggle to compete in either price or convenience with the e-tail market. But that's not for want of trying. Innovative strategies proliferate: this week, the US bookstore chain Barnes & Noble launches its own e-reader, the Nook, in the UK to compete with various Kindles, Kobos and iPads. In May, Waterstones startled observers by climbing into bed with Amazon, which means that personal shoppers can now buy ebooks from Amazon courtesy of Waterstones' internet connection, despite chief executive James Daunt's earlier view that the online retail giant was a "ruthless moneymaking devil".

In this chaotic world, only the boldest would forecast the impact of the Random House–Penguin merger. In more traditional times, reducing the number of big players in an industry and putting a significant share of the market in the hands of the new company would be interpreted as a direct attack on consumer choice. In a move that might hint at a little anxiety about the attentions of the OFT, both parties to the merger are insisting their imprints will maintain their distinctive identities, and deny talk of anything other than back-office cuts.

But the only obvious casualties are likely to be blockbuster authors and their agents, who may feel the impact of one fewer competitor in the small market for books that win heroic advances. It is unlikely to matter much to readers. The independent publishing sector, which has about 45% of the market, repeatedly shows that big isn't necessarily best. The real change defining the relationship between writer and reader, and the one that may yet dynamite for ever the traditional business model, is self-publishing, which does away with publishers altogether.

Paper also introduces stricter rules on travel in bid to control costs in the run-up to Christmas

The Financial Times has imposed a recruitment freeze and a ban on all but the most essential travel, to control costs in a tough advertising market.

John Ridding, the Financial Times chief executive, outlined the measures in an internal email on Tuesday to the newspaper's senior management group titled "Cost control/profit protection", seen by MediaGuardian.

The measures, which apply to all staff, include a freeze on recruitment and stricter rules on travel expenses.

"Unless there is a clear commercial opportunity that will deliver this year, or an essential editorial trip, we should let our global network do the work (that is what it is there for)," said Ridding. "Only the most vital of journeys will be approved."

He said that board members will also be focused on finding revenues and saving costs so staff should not take up their time with non-essential and non-urgent requests.

The measures will run until Christmas and have been implemented following a marked downturn in the advertising climate, including weak third-quarter performances by Sir Martin Sorrell's WPP and Maurice Lévy's Publicis Groupe.

"As you'll probably have noticed from recent results publications and statements from advertising agencies and news media groups, the advertising market has taken another turn for the worse," Ridding said. "And while we continue to take market share, it is clear that conditions have become tougher and that the overall advertising 'pie' is under pressure. Visibility, too, is very poor."

He said that the run-in to the end of the year is a "crucial time" with some "important [advertising] booking weeks" ahead.

"Given the need to ensure we meet our targets and protect profits, and given the lack of visibility, we need to be extremely tight and rigorous on costs," he added.

Ridding's directive comes a day after parent company Pearson published a trading update on the first nine months of 2012 which disappointed analysts, even though the company maintained guidance that it would hit its full-year forecast of about 84.9p earnings per share.

Overall Pearson reported flat underlying revenues in the first nine months and a 5% fall in operating profit.

FT Group, which includes the Financial Times and Pearson's 50% stake in the Economist, performed well with underlying revenues up 7% for the period.

However, Pearson noted that the advertising market "remains weak and short term".

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Share sale by Rona Fairhead comes just days after Pearson publisher, Penguin, merges with Random House

It has been a busy week in the Pearson boardroom.

Fresh from revealing plans for its Penguin merger with Random House (sadly, Random Penguin was not used for the new moniker) and fighting off advances from Rupert Murdoch's NewsCorp, you would think the board would have little time for much else.

However, Financial Times Group chief executive, Rona Fairhead has still managed to make a quick transaction on the stock market.

The executive took home £651,495 this afternoon, after she sold 52,371 shares at £12.44 a pop.

Just over 2,000 of the shares were given to her as part of a five year incentive scheme, while the remainder were from her current portfolio, which has been reduced to 440,522 shares (value: £5.5m).

Some inside FT HQ might question the timing of the sale, because it comes just 24 hours after the FT newspaper chief executive, John Ridding, announced a recruitment freeze and a ban on all but the most essential travel.

Parent company, Pearson, announced its third quarter results on Monday, revealing sales across the group were up 5% but operating profits fell 5%.

A strong performance in North America helped in its international education division, which accounts for most of the company's revenues – shedding Penguin was part of its strategy to focus even more on education publishing.

According to her biog on the company's website, Fairhead, 50, who is a CBE and previously chief financial officer, has:

Previously held senior management roles at speciality chemicals company ICI plc, and in aerospace with Bombardier/Shorts. She has an MBA from Harvard Business School. Rona currently serves as non-executive director of The Cabinet Office of UK Government and of HSBC Holdings plc, where she chairs the risk committee. She is also a member of the Cambridge University Library Visiting Committee.

Shares in Pearson closed up 13p at £12.45.

I have been worried about the Daily Mail's editor, Paul Dacre, for some time. After seeing today's issue of his paper, I really think it's time for the men in white coats to visit its Kensington offices as soon as possible.

The Mail devotes 11 full pages, including the whole of the front page, to a "special investigation" into one of the Leveson inquiry assessors, Sir David Bell.

It seeks to present Bell, the former Financial Times chairman, as the spider at the centre of a web of intrigue. In a classic example of conspiracist innuendo, it implies that the "elitist liberal" Bell is covertly exercising influence that somehow threatens the freedom of the press.

He is presented across many thousands of words as some kind of shadowy figure who, through his chairmanships and trusteeships of various charitable bodies, is exerting undue and unaccountable power.

Through a series of leaps of logic and phoney "revelations" of Bell's publicly acknowledged positions, the articles persistently insinuate that he has been up to no good.

He is even accused of being somehow responsible for the Newsnight report which falsely suggested that Lord McAlpine had been guilty of child abuse and, by extension, that he is also part of the reason for the BBC's current crisis, including the resignation of its director-general.

In a leading article, the Mail says its "investigation paints a picture of how a small, intertwined nexus of Left-of-centre individuals – some with links to Ofcom, the media regulator, and virtually all with links to Bell – have sought to exert huge influence on the inquiry."

Clearly, this is a sensitive time to attack a member of Lord Justice Leveson's team, as the editorial admits:

"The Mail is acutely aware of the seriousness of publishing this investigation. We know all too well that our enemies will accuse us of being aggressively defensive in a bid to pre-empt the outcome of the Leveson report, which is due any week now.

But in the light of the scandal engulfing the BBC, we passionately believe in the public's right to know about a senior Leveson assessor's role in it."

So, in order to lend some sensible perspective to this astonishing accusation about Bell's supposed complicity in the BBC's "scandal", let me try to disentangle what amounts to a farrago of distortion with added vilification.

First, Bell is a trustee of an organisation called Common Purpose, a charity that runs leadership development programmes. Its chief executive is Julia Middleton.

Second, Bell was the inaugural chair of the Media Standards Trust (MST), a campaigning body supported by charitable donations that was set up in 2006 to address concerns about a deterioration in journalistic standards. It has been acutely critical of the Press Complaints Commission. It is also connected to the Hacked Off campaign group.

Third, Bell is a trustee of the Bureau of Investigative Journalism (BiJ), a journalistic venture created in 2010 and funded by a philanthropic grant. It was responsible for the inaccurate Newsnight report that wrongly implicated McAlpine as a paedophile.

None of these activities are covert. Bell also happens to be chair of the council at Roehampton University, chairman of Sadler's Wells Trust and director of the global social enterprise group Imagine Nations. He is what is generally known as a do-gooder.

The Mail, however, casts him as a do-badder. It implies that he, Middleton, and several other people connected to them through lobbying, PR groups and Ofcom constitute a covert network of "incestuous relationships" that, in various ways, are linked to the Leveson inquiry. These include fellow assessors and inquiry witnesses.

Given the length of the Mail investigation, it is impossible to deconstruct every false link and illogical innuendo, but let's look at one - the implications of Bell's trusteeship of the Bureau of Investigative Journalism (BIJ).

The bureau came to life as the result of a £2m grant from Elaine and David Potter. They are the bureau's trustees along with Bell and George Brock, the head of the journalism department at City University London, which provides the BIJ's accommodation.

As trustees, the four have been at arm's length from the daily operations of the bureau itself. Until the Newsnight debacle, the bureau had been noted for the quality of its journalistic output. It had previously won awards and it was recently nominated for four of this year's British Journalism Awards.

When the Newsnight mistake occurred, in circumstances that have yet to be explained, the trustees met and the bureau's managing editor, Iain Overton, resigned. The reporter concerned, Angus Stickler, has stepped aside. It was rightly said that the Newsnight segment was an example of "shoddy journalism" and it's possible that the episode may imperil the bureau's future.

But Bell's link, as a trustee, cannot be said to be anything other than tangential.

Similarly, Bell is also smeared by the Mail over the Media Standards Trust's running of the annual Orwell Prize because, in 2008, it was awarded to The Independent journalist Johann Hari. It transpired years later that he was guilty of plagiarism and he returned the prize.

All that having been said, the Mail does raise some questions about Bell that certainly do deserve attention.

For example, Bell is a trustee of the Esmee Fairbairn Foundation, a grant-giving charitable trust that provided a generous grant to the MST (though it was given prior to Bell joining the trust's board).

Furthermore, Bell is chairman of the Pearson Foundation, a charity that also gave a big grant to the MST.

Though there was no attempt to conceal these grants, and Bell's links to the foundations were not secret, it does appear to me that being a trustee of a body giving grants to a body that he chairs is inappropriate.

However, this particular point aside, the rest of the accusations, allegations and insinuations about Bell, Middleton and a variety of their colleagues and acquaintances appear well wide of the mark.

For a national paper to devote the best part of a dozen pages to an investigation so obviously based on prejudice against the Leveson inquiry is surely counter-productive.

It is very likely to reinforce the view of politicians that the Mail's brand of journalism is too often born of bias. And that that bias is located in the person of its editor.

How is it defensible to talk of "freedom of the press" in the collective sense when a single man exercises so much power? The likeliest effect will be to convince MPs that statutory press regulation is a good idea.

Belated full disclosure: I teach at City (I tend to overlook it because I play no part whatsoever in the university's admin. I lecture and I mark. That's it). See also:11 surprising revelations in the Daily Mail's anti-Leveson hatchet job in the New Statesman and in Mail declares war on Leveson and warns of left-wing 'coup' in The Week

Alina Vandenberghe tells the Guardan Mobile Business Summit how devices are shaking up several industries

"The revolution in education is not something that's going to happen tomorrow. It's starting to happen quite a while ago, when in Nigeria and Kenya kids in schools would use their mobile phones to subscribe to information," says Alina Vandenberghe, head of mobile and gaming at Pearson.

Vandenberghe was speaking at the Guardian Mobile Business Summit 2012 conference in London, in a talk focusing on how devices are disrupting the worlds of education, games and publishing.

"Besides loving mobile, I love in the morning when I wake up knowing that the products I'm working on impact the next generation, the children," she said.

She also noted that in the US, more than 50% of young children have access to a touchscreen smartphone or tablet, and suggested that children are learning "by doing" rather than just by listening.

"The most interesting thing that happened in 2012 is the way content is used is changing, and this happens especially with the textbooks that are leading the way," she said. "In some private schools, the teachers say 'no longer with this book-filled backpacks, we're going to make the iPad mandatory."

But Vandenberghe came back to what's happening in developing countries, and a product called MX Touch that works on affordable Android tablets in India, showing that educational disruption is not just a Western world / iPad thing.

Vandenberghe talked about the "pinch and swipe generation" of younger children, showing the famous video of a child trying to use a printed magazine like a touchscreen.

She offered some data, explaining that in August 2012 there were more than 78k apps in the Books category of Apple's App Store, and more than 79k in the Education category, with 29% and 38% of those apps, respectively, free downloads – both low percentages compared to other categories.

"People do care about education and they do pay money to get to it," she said, pointing to similar stats in the Google Play Android store. 50k and 41k apps in the Books and Education categories, although with 53% and 54% free respectively . In both stores, the average price was well over $4.50 per app.

Vandenberghe also claimed that the top-selling Education apps are those aimed at children, and talked about changing expectations from kids of their education tools.

"Kids do not like long, boring text. They like to have mini content bites, and also content that's personalised to them," she said.

Vandenberghe also talked about the importance of interconnected apps: children starting work on a document at school, then editing it on the bus home. Or starting to watch a Netflix film on TV then picking it up on a tablet in their rooms. "They get really curious when that concept is not prevalent," she said.

More feedback from kids: the importance of rewards and constant, well, feedback. "They love badges, they love sounds, and to hear that they're interacting with the content that they're touching," she said.

Vandenberghe also talked about the "ubiquity of education" – it doesn't start at 9am and end at 4pm, it surrounds children throughout the day. And finally, she explained the importance of "teleporting abilities" – the ability to jump around within educational content and learn at their own pace, skipping or repeating when necessary.

"The little ones are smarter than you think," she said. "They may outsmart you, and you better be prepared!"

Decision comes less than two months after missing out in battle to take reins at parent company Pearson

Rona Fairhead, the chairman and chief executive of the Financial Times Group, is to stand down less than two months after missing out in a battle to take the reins at parent company Pearson.

Fairhead, who has worked at Pearson for 12 years, was considered one of the leading candidates to take over running the company from long-time chief executive Marjorie Scardino.

Scardino, who announced in October that she is to step down after 16 years running Pearson, is being replaced by John Fallon, the head of the company's education division.

"The leadership transition at Pearson makes this a natural moment for me to make a change," Fairhead said. "I will miss Pearson deeply but will cheer from the sidelines as its new leadership team develops and evolves Pearson's successful strategy and culture. [I] am ready to tackle a new set of challenges."

Fairhead held a number of senior roles at Pearson, including chief financial officer and chairman of the now hived-off subsidiary Interactive Data Corporation.

Fairhead has most recently been responsible for running FT Group, home to the FT and Pearson's 50% stake in Economist Group, publisher of the Economist.

She will step down from the board at Pearson's annual general meeting in April next year.

"For a little over a decade, Rona has been at the heart of Pearson's development and progress," said Scardino. "She has led a fundamental restructuring and refocusing of the FT Group, including its successful development of digital businesses, and leaves a strong organisation with a bright future in a highly challenging industry. She has been an exceptional executive and colleague and while we regret her decision to go, we respect her desire for a new challenge."

Fairhead was one of a number of internal candidates considered possible successors to Scardino, including Will Etheridge, the head of the North American Education operation, and Penguin head John Makinson.

Makinson is to take on the role of chairman of the board of a new venture combining Pearson's book business Penguin with German company Bertelsmann's Random House.

Fairhead, 51, who received a CBE for services to industry in the New Year honours list, will receive a payoff of more than £1m when she leaves at the end of April next year.

Under the terms of her contract Fairhead will receive a payout of one year's salary, which stands at £529,000, as well as pension and benefit costs and half of the maximum possible bonus she might achieve over the course of this year.

Using Pearson's 2011 annual report as a guide, Fairhead's severance package could include a £462,000 bonus-based payment; £40,000 in lieu of allowances and benefits, such as the use of a chauffeur at Pearson; and £137,000 relating to pension contributions.

Fairhead's total payoff is likely to be about £1.15m, on top of the £1m-plus she is set to receive in total remuneration for working out her contract until she steps down at the end of April next year.

She continues to hold 469,218 shares as part of Pearson's long-term incentive programme, although she will not receive a payout for all of these.

Fairhead recently sold off just over 52,371 of Pearson shares she holds in a personal capacity, netting just over £650,000, while retaining 440,522.

She also receives £200,000 a year as a non-executive director at HSBC, a position she also holds at the Cabinet Office.

Fairhead is the latest in a string of high-profile female executives to stand down from major companies in recent months. In October Anglo American's chief executive, Cynthia Carroll, announced her departure.

There is also speculation about the future of Dame Gail Rebuck, the chairman and chief executive of Random House UK, with Pearson and Bertelsmann yet to clarify what role she would take in their newly formed book venture Penguin Random House.

When Scardino leaves Pearson at the end of the year there will be only two female chief executives in the FTSE 100: Angela Ahrendts, at fashion group Burberry since 2006, and Alison Cooper, at Imperial Tobacco since 2010.

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It's a nonsense to give departing directors the thick end of £1m just because they didn't get the promotion they sought

Rona Fairhead's decision to quit Pearson is understandable. She's been on the board for 12 years and was passed over for the chief executive's job.

Having been finance director and then chief of the FT Group, she deserves a decent party as she leaves.

But that's not what Pearson has in mind. Nothing like. It thinks a year's salary and 50% of an annual incentive payment should do the trick, meaning the thick end of £1m.

Hold on a minute, though, Pearson doesn't want Fairhead to depart in search of new career challenges.

Outgoing chief executive Dame Marjorie Scardino is clear on that point. "We regret her decision to go," said Scardino, paying tribute to the talents Pearson would rather retain. So why pay Fairhead to go?

Ah, says Pearson, that's because "under the circumstances" the remuneration committee agreed with Fairhead's assessment that her exit next April would also be in the company's interests.

The "circumstances," one assumes, means the choice of John Fallon to succeed Scardino. But, come on, it's a nonsense to give departing directors a year's dosh just because they didn't get the promotion they sought. Parallels with George Entwistle at the BBC should be resisted: the Pearson case is more brazen.

Auf wiedersehen, debt. Financial newspaper FT Deutschland never made a profit in 12 years but its 309 employees made sure its last edition was in the black. On a final black front page (hat tip, Die Welt's Holger Zchäpitz), under a title piece changed to "Fi n al Times Deutschland", is the headline Endlich Schwartz – which roughly translates as "finally black". FT Deutschland was founded in 2000 by FT publisher Pearson but it sold its 50% stake to Gruner + Jahr in 2008. Highlights of the last FTD edition include, on the website (scroll to the bottom of the front page), a photo of the whole Hamburg-based team bowing in mourning, with an apology to advertisers, PRs, politicians and readers.

Alexander Lebedev needs an investor, there's a new boss at Pearson, and the regional press faces further advertising woe

With Rupert Murdoch set to spin off his newspapers, Alexander Lebedev on the hunt for an investor to prop up the Independent and another steep decline in advertising on the cards, 2013 is set to be another tough year for the publishing industry.

A feast of sporting and royal events provided a tonic for newspaper advertising and sales this year. No such luck in 2013. The commercial opportunity of the birth of the Duke and Duchess of Cambridge's first child aside, it will be a dogfight among publishers as advertisers continue to go elsewhere with their cash. Just over £1bn is forecast to be spent on national newspaper advertising, 9% less than 2012 and nearly two-thirds less than the £2.55bn in 2005.

All eyes will be on Murdoch's plan to spin off News Corporation's newspaper and book publishing assets from his more lucrative film and TV businesses, which will result in more pressure to address the £1m-a-week losses a week at the Times. News International is by no means alone in seeking to reduce costs – the publisher of the Guardian is planning to cut 68 journalist posts in order to help reduce its editorial budget by £7m, after a £44.2m loss in the year to the end of March.

"There will be a relentless battle between cost-cutting and product investment and development," says Douglas McCabe, media analyst at Enders. "Culturally News Corp has always been good at backing initiatives it believes in, and that spirit is not going to disappear. It will be a scale, global newspaper and book publishing business with many premium assets."

The new business will face major changes, including an effort to get rules barring a seven-day operation at the Times and Sunday Times loosened, but scrapping the papers' online paywall is not likely to be one of them.

"At the moment you can't say that any publisher has got the model [to survive] exactly right," says Rob Lynam, head of press at media buying agency MEC. "In which case why would they [drop the paywall]? I see no indication that is what they are looking at." McCabe says that he "wouldn't rule out" a potential newspaper sale, even by Murdoch.

Other potential sellers are Russian billionaire Lebedev, who is looking for an investor to share the losses at the Independent and Independent on Sunday, and Financial Times parent Pearson. There are some who speculate whether, following the success of taking the London Evening Standard free, Lebedev might consider the same for one of the market's few bona fide success stories, the cut-price 20p national i.

"What other newspaper is showing growth like that. The i has done well and imagine what would happen at 1m-plus copies a day out there," asks a press director at one major media buying agency. "People would pick it up, it is a better read than the Metro, there would be appetite among advertisers. The Independent now has a fundamental scale problem and is at risk of falling off the roster of advertisers, something has to give."

John Fallon takes over the reins at Pearson in the new year and has taken a more equivocal stance on a sale of the FT than his predecessor, Dame Marjorie Scardino, stating "we never rule anything out". The already well-oiled rumour mill has suggested Michael Bloomberg of late, although he doesn't complete his final term as mayor of New York until November.

David Montgomery's newly minted regional newspaper business Local World, home to 110 titles formerly owned by Northcliffe Media and Iliffe News & Media, will be tested by a predicted 10% fall in the regional advertising market in 2013. Advertisers are forecast to spend less than £1bn on regional papers for the first time, more than 60% below the 2005 level of £2.5bn.

The jury is still out on whether regulators are likely to start to take a more benign view of competition issues in the ailing regional market, allowing Montgomery to bring shareholder Trinity Mirror's titles into the fold.

"One obvious tactic could be to look at bringing in titles, or groups of titles, from Trinity or others where there isn't likely to be a competition issue," says McCabe.

The magazine market will face a projected 7% slide in ad revenue and there has been no growth since 2005; like newspapers, magazines have to get to grips with digital strategy.

Sales of the top 100 magazines have plummeted by 31% from about 31m to 21m over the last decade, according to an analysis of data from the Audit Bureau of Circulations.

On a brighter note, Jo Blake, a director at media buying agency Arena, says that, with huge sales expected this Christmas, 2013 should be the year of the tablet. "The key will be tablets and how publishers get to grips with monetising [them]," she says.

The implementation of a tablet strategy at Trinity Mirror, the publisher of the Daily Mirror, Sunday Mirror and Sunday People, has seen a surge in investor confidence reflected in a two-year share price high.

New chief executive Simon Fox will be hoping that the revitalisation is not derailed by the allegations of phone hacking reaching beyond News International. Trinity Mirror has strenuously denied any wrongdoing at its titles.

Media buying agency executives do not see an issue with advertiser support over the rumbling issue of phone hacking, or the fallout of the Leveson inquiry. It took unprecedented national outrage to force advertisers to pull out of the now defunct News of the World.

"It will be interesting to see what happens over Christmas. If retailers do well, they are such a big part of the [ad] market for newspapers and it will give more confidence," says Lynam. "Some recent indicators have been more positive, but everyone will be challenged next year."

Financial Times owner looks to tap into student market by taking 5% share in digital book venture in a deal worth $89.5m

Financial Times-owner Pearson is to take on Amazon with a move into the e-reader market by purchasing a 5% stake in Nook, Barnes & Noble's digital books venture, in a deal that values the business at $1.79bn (£1.1bn).

Pearson has acquired a 5% stake in Nook Media – a new company that houses Barnes & Noble's e-reader and tablet operations, digital bookstore and 674 college bookstores in the USA – for $89.5m.

The deal, which includes the option for Pearson to up its stake in Nook to 10% in the future, values the business at $1.79bn.

Following the deal, Barnes & Noble will hold a 78.2% stake in Nook Media, with Microsoft holding 16.8%.

The deal will put Pearson in competition with Amazon's market-dominating Kindle e-reader –Jeff Bezos's company enjoys 95% of sales in the market– with the Nook currently only available in the US.

Pearson said the aim of the strategic investment is to boost its north American learning division by better tapping into the student market with digital products.

"Pearson and Barnes & Noble have been valued partners for decades, and in recent years both have invested heavily and imaginatively to provide engaging and effective digital reading and learning experiences," said Will Etheridge, chief executive of Pearson North America.

"With this investment, we have entered into a commercial agreement with Nook Media that will allow our two companies to work closely together in order to create a more seamless and effective experience for students".

In 2011, Pearson's north American education business reported revenues of £2.58bn, 44% of total group sales. Adjusted operating profits were £493m, 52% of total group adjusted operating profits.

Microsoft invested $300m in Nook in April.

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Is the FT for sale now that Dame Marjorie Scardino has retired? If not, hadn't someone at Pearson better say so, and quickly?

Uncertainty casts a blight on newspapering. When there's stability there's success: good people stay, good people want to join. But when the whole paper's in play – maybe passing from one owner to another – then the precise opposite operates. Good journalists leave, good replacements go elsewhere.

Marjorie Scardino gave the Financial Times 15 years of certainty. It was a prime Pearson responsibility and would stay that way while she stayed chief executive. But that pretty golden era ended as the old year turned and Dame Marjorie retired. Enter John Fallon from the education division: enter uncertainty.

Is that a Bloomberg bid we see just over the horizon? Surely one of the big information operators would be tickled pink to have a prestige daily as part of its package? Fallon doesn't move to quash the speculation. Indeed, he doesn't move at all. Sitting there mum, though, doesn't make sense for a property so fragile and precious. Anxiety hurts. Rumour hurts. If Fallon is wise, he'll repeat the Scardino pledge – or admit he's a seller pretty damn quick, and get on with it while there are good things left to sell.

Parent company of FT Group says weak market conditions means that it expects operating profits of £935m for 2012

Pearson's share price is down more than 3%, the biggest faller in early trading among FTSE 100 companies, after the publisher of the Financial Times surprised investors by reporting a profits downgrade for 2012.

In early trading, Pearson shares were down 3.5%, 44p to £11.94.

Pearson, which has developed a reputation in the City for consistently beating its own forecasts, has downgraded operating profit and earnings per share for 2012.

Pearson said weak market conditions in the fourth quarter – key selling season for corporate advertising, publishing sales at its Penguin book arm and higher education business – means it expects operating profits of £935m for 2012.

Adjusted earnings per share is forecast at 84p.

The consensus among City analysts was for Pearson to report operating profits of £942m and EPS of 84.9p.

While the lowering of estimates is considered "light", Pearson has developed a reputation in the city for consistently beating its own forecasts.

FT Group, home to the Financial Times, expects to report "good revenue growth" for 2012.

Pearson said growth at the division, which includes a 50% share in the publisher of the Economist, came despite a deterioration in advertising sales in the fourth quarter.

FT Group digital and subscription-based revenues continued to grow in 2012, although profits will be "significantly" lower year on year because of "further actions to accelerate the shift from print to digital".

The division's profits will also be hit by the loss of income from FTSE International after Pearson sold its 50% interest to the London Stock Exchange for £450m in December 2011.

FTSE accounted for £20m of profit and 2.2p of eps in 2011.

The division is the subject of constant speculation of a possible £1bn sale following the appointment of new Pearson chief executive John Fallon.

Penguin, which is to be merged in a joint venture with rival Random House, benefited from a good fourth quarter and "traded in line with our expectations in its key selling season".

The division will report flat revenues on a constant currency basis year on year – in spite of tough conditions in the physical sales market – although perhaps tellingly Pearson does not say how Penguin's performance rates on the key metric of like-for-like sales.

In Pearson's education division, which accounts for 75% of the company's business, its North American division has endured a tough year.

The company said US school and higher education publishing industries declined by 11% in the first 11 months of 2012, which hit Pearson's operations.

"Our services and digital-learning revenues continued to grow rapidly and we benefited from a strong performance from recent acquisitions and tight cost control," said Pearson.

"In general, Pearson's businesses continue to face tough market conditions and structural industry change which we see continuing into 2013," it added.

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Music station's future still uncertain but Pearson or UTV Media could possibly step in

Bauer Media's bid to buy Absolute Radio is understood to have stalled at the 11th hour with the future of the music station still uncertain.

The German-owned private radio and magazine company emerged as the favourite to buy Absolute, owned by the Times of India parent company Bennett, Coleman & Co, after a rival consortium fronted by former Virgin Radio chief executive John Pearson pulled out.

But talks between Bauer, home to the Kiss and Magic networks, and the Absolute owner have fallen through, according to industry sources.

It remains to be seen whether this paves the way for the return to the negotiating table of Pearson or TalkSport owner UTV Media, which has also expressed interest in the station, or whether the Bauer bid can be resurrected.

Pearson, who had the support of Time Out backer Peter Dubens, came close to buying the station on two occasions and was understood to have tabled a £15m bid.

Absolute Radio's chief operating officer Clive Dickens announced last month he was leaving the station to join Australian broadcaster Southern Cross Austereo.

His responsibilities at Absolute were split between chief executive Donnach O'Driscoll and chief financial officer Adrian Robinson, with content director Tony Moorey taking greater responsibility for programming.

Absolute Radio declined to comment. A Bauer Media spokesman said: "We do not comment on speculation around commercial matters."

Bennett, Coleman & Co is understood to be looking for bids in excess of £20m for the station which it bought for £53.2m from SMG (now renamed STV) in 2008, when it was still called Virgin Radio.

Although audiences for the main Absolute Radio station tumbled after its rebrand to Absolute, the broadcaster has launched a number of spin-off digital stations, now totalling six, with the most popular Absolute 80s, listened to by nearly 900,000 people per week on average.

The station reported a rise in listeners in the latest official Rajar figures, with a weekly reach of 1.77 million people tuning into Absolute Radio in the final three months of last year, up 10.8% year on year and nearly 15% on the previous quarter.

Breakfast host Christian O'Connell also saw his audience grow, possibly picking up older listeners from Radio 1, where Nick Grimshaw replaced Chris Moyles on breakfast.

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