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June 11, 2008

Sharks circle as UBM courts Informa in bid to form media and events powerhouse

Pressure is being mounted by global business media company UBM to secure control of Informa, an international provider of specialist information and services for the academic and scientific, professional and commercial business communities. The result would be a global business media and events powerhouse, but UBM isn’t the only fisherman.

Last month, all the talk was of the beginnings of a global venue network after it was revealed that Middle East company ADNEC had acquired the leading British venue, ExCeL London, and had already identified several other conference and events capitals of the world for network expansion. This month, the talks will be of two giants in the media and events space, UBM and Informa, merging to form a global media network that could create additional long-term value in a share-only deal.

Acknowledged approach
On Sunday, Informa confirmed the Sunday Telegraph’s report that UBM had submitted a merger approach that would create a £3 billion blue-chip company with 35% of its combined revenues attributable to events – the largest category within their combined portfolio. That in itself isn’t surprising, as media companies continue their efforts to distance themselves from any reliance on print advertising revenues and invest in a more balanced portfolio of content subscription-based services, data services, events and digital distribution.

Tim Weller: The founder of Incisive Media's input could yet prove key to the UBM-Informa saga

Reed Elsevier’s Crispin Davis has long advocated such a strategic shift (although his intentions to offload Reed Business Information, the Group’s business print publishing division, separately from Reed Exhibitions continues to perplex many inside, as well as outside of the company).

Marriage made in heaven
The UBM-Informa merger, however, makes perfect sense. UBM is under-leveraged and cash rich, while Informa is over-leveraged with £1.1 billion of debt – ironically due in part to its acquisition of data services group, Datamonitor, which could yet play a significant role in creating additional shareholder value in a merged entity.

UBM is over reliant on advertising, while Informa has a more modern portfolio and most certainly is not. UBM, which includes the business events and publishing arm CMP, would open the doors to events in the BRIC (Brazil, Russia, India, China) economies, while Informa would reciprocate with access to the Middle East and Asia. Informa has great depth, for example in telecoms, as does UBM. In fact, there are more examples of synergies across the combined portfolios, particularly following Informa`s acquisition of telecoms conference company IIR’s international portfolio of conferences and exhibitions.

The big name game
Dominic White, in yesterday’s Daily Telegraph, identified a few of the personalities involved in what could become a soap-style share merger versus private equity acquisition struggle for the keys to Informa.

In the blue corner sits the conservative David Levin, UBM chief executive, whom White says could comfortably have bid for and secured the business arm of Emap, which went in part to Apax, the private equity fund. However, although acquisition of Emap Communications would have propelled UBM into the FTSE 100, White points to Levin`s financial conservatism as the reason to hold back from a cash acquisition in preparation for a share-only approach to co-create UBM Informa, using UBM cash to offset Informa debt – and in what looks structurally to be the perfect marriage for the combined shareholders in terms of gearing, industry sectors, global regions, services, synergies and cost savings, and therefore longer term value.

In the round sits Peter Rigby, Informa`s chief executive. One suspects that on the one hand, future shareholder value would most probably benefit enormously from a merger, although in reality this is likely to result in UBM’s management assuming control at the expense of Rigby and his team. And, because credit is tight, investors such as Candover and Cinvan are likely to shy from highly leveraged companies such as Informa. Rigby will, therefore, recognise that Levin has played a timely card in the hope that he can secure control of the slightly larger Informa for a nil share premium merger at a point when appetite for debt in the capital markets is weak.

The Telegraph’s Damian Reece also predicts that Rigby will either have to swallow a non-exec chairmanship or leave the group altogether, since it is unlikely that the shareholders would want Levin and Rigby sharing the helm of the joint entity. He will be mulling over his and his shareholders’ options.

Incisive role
Meanwhile, in the red corner sit the private equity investors and their recently acquired media toys. Enter Apax, which has recently gained control of Incisive Media and Emap, now under the stewardship of David Gilbertson, former chief executive of Informa – what sweet irony. Could it be possible that Emap, Incisive and Informa could come under the control of the private equity firm or could it be that Candover and Cinvan, who bid for the group in 2006 when the markets were bull, might find today’s vastly reduced share price irresistible? Or, as Reece suggests, might they, like Levin, bide their time before bidding for a combined UBM Informa to add to their Springer Science and Business Media assets once Levin has secured his catch? And fear not, there will be others in the private equity wings biding their time as the FTSE continues to dip, and over-leveraged companies like Informa come up cheap.

While the sharks circle their prey, institutional shareholders in Informa may well be looking to the movements of Tim Weller, the founder and mercurial business operator of Incisive Media, who is widely believed to have lured Gilbertson from Informa on behalf of Apax. One suspects that he will be pulling some strings in the Square Mile, where he continues to be star-rated by media analysts and rarely loses at media’s poker table. Weller will see that an Apax cash offer that offers a short-term premium to Informa shareholders, particularly institutional, may yet win the day over a longer-term share-only proposition from Levin.

Weller’s input may yet prove incisive.

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