Moody's to Buy Amsterdam based publisher Bureau Van Dijk (BVD) for $3.3Billion

From Reuters:

Credit ratings agency Moody's Corp (MCO.N) said on Monday it would buy Dutch financial information provider Bureau van Dijk for about $3.3 billion, to extend its risk data and analytical businesses. 

Moody's will fund the deal through a combination of offshore cash and new debt financing.

Amsterdam-based Bureau van Dijk, owned by the fund EQT VI, distributes financial information and private company datasets of 220 million companies.

The deal is expected to benefit Moody's revenue and earnings in 2019, while adjusted earnings in 2018 is expected to see an uptick.

From the press release:

Moody’s Corporation (NYSE:MCO) announced today that it has entered into a definitive agreement to acquire Bureau van Dijk, a global provider of business intelligence and company information, for €3.0 billion (approximately $3.27 billion). The acquisition extends Moody’s position as a leader in risk data and analytical insight.

“Bureau van Dijk is a high growth information aggregator and distributor that positions Moody’s at the center of a unique network of global risk data,” said Raymond McDaniel, President and Chief Executive Officer of Moody’s. “This acquisition provides significant opportunities for Moody’s Analytics to offer complementary products, create new risk solutions and extend its reach to new and evolving market segments.”

“Moody’s is a highly regarded, authoritative source of credit ratings and analytical tools, with a strong brand and global reach,” said Mark Schwerzel, Deputy CEO of Bureau van Dijk. “The addition of Bureau van Dijk’s powerful information platform to Moody’s Analytics’ suite of risk management solutions presents a wide range of opportunities for us to better serve our combined customer base.”

Bureau van Dijk, operating from its Amsterdam headquarters, aggregates, standardizes and distributes one of the world’s most extensive private company datasets, with coverage exceeding 220 million companies. Over 30 years, the company has built partnerships with more than 160 independent information providers, creating a platform that connects customers with data that addresses a wide range of business challenges.

Bureau van Dijk’s solutions support the credit analysis, investment research, tax risk, transfer pricing, compliance and third-party due diligence needs of financial institutions, corporations, professional services firms and governmental authorities worldwide.

In 2016, Bureau van Dijk generated revenue of $281 million and EBITDA of $144 million. Bureau van Dijk will be reported as part of Moody’s Analytics’ Research, Data & Analytics (RD&A) unit. Moody’s expects approximately $45 million of annual revenue and expense synergies by 2019, and $80 million by 2021. On a GAAP basis, the acquisition is expected to be accretive to Moody’s EPS in 2019. Excluding purchase price amortization and one-time integration costs, it is expected to be accretive to EPS in 2018.

Moody’s will fund the transaction through a combination of offshore cash and new debt financing. The acquisition is subject to regulatory approval in the European Union and is expected to close late in the third quarter of 2017.

Bureau van Dijk is owned by the fund EQT VI, part of EQT, a leading alternative investment firm with approximately €35 billion in raised capital across 22 funds. EQT funds have portfolio companies in Europe, Asia and the U.S. EQT works with portfolio companies to achieve sustainable growth, operational excellence and market leadership.

"We are very pleased with Bureau van Dijk's development under EQT ownership and want to thank management and employees for their hard work and dedication. We see an excellent fit between Bureau van Dijk and Moody’s Analytics, and congratulate Moody’s on acquiring this uniquely positioned company," said Kristiaan Nieuwenburg, Partner at EQT.

 
Some older stories on BVD from the blog:

Private Equity owners but the company up for sale in 2007 and had trouble selling at the time.  Reports suggested it sold for about $1.0B so quite an impressive return over 10 years for some group of owners.

Berkery Noyes Quarterly Media Deals Reports

Berkery Noyes just released its Information Industry report for Q3 2013, which covers merger and acquisition (M&A) trends over the past 21 months. Click here to view the industry’s median multiples, as well as transaction data from the two-page PDF.

Using a database product from D&B they have also presented segment analyses:

Private Equity Merger & Acquisition Trends For Q3 2013

The number of private equity acquisitions in the Information Industry increased 18 percent in third quarter 2013. Meanwhile, deal flow between private equity firms rebounded sharply. After falling 50 percent between first and second quarter 2013, secondary buyout volume increased almost fourfold over the past three months.

Click here to read the two-page PDF.

Media and Marketing Industry Merger & Acquisition Trends For Q3 2013

M&A volume in the Consumer Publishing segment increased 27 percent in third quarter 2013. There were several notable newspaper transactions during the quarter that were completed by individual billionaires. This included Jeffrey Bezos' acquisition of The Washington Post Company for $250 million and John Henry's acquisition of The Boston Globe from The New York Times for $70 million.
Click here to read the two-page PDF.

Online and Mobile Industry Merger & Acquisition Trends For Q3 2013

There were two high profile mobile advertising transactions during the quarter, each of which highlights the growing interest in real-time bidding solutions. Within this subset, Twitter acquired mobile ad serving platform MoPub for an estimated $350 million while Millennial Media acquired mobile ad network Jumptap for $239 million.
Click here to read the two-page PDF.
Software Industry Merger & Acquisition Trends For Q3 2013
Deal value in the Infrastructure Software segment throughout the first three quarters of 2013 was driven in part by the cyber-security subset. Along these lines, three of the top five transactions by value in the segment year-to-date were related to cyber-security. The largest Infrastructure Software deal in third quarter 2013 was Cisco Systems’ acquisition of SourceFire for $2.7 billion.
Click here to read the two-page PDF.
Healthcare Industry Merger & Acquisition Trends For Q3 2013
The Healthcare IT segment underwent a 56 percent volume increase on a quarterly basis. It also accounted for nearly half of the industry’s aggregate M&A volume, as opposed to 31 percent in the prior quarter. Deal volume in the Pharma IT segment also increased 33 percent year-to-date when compared to the corresponding period in 2012.
Click here to read the two-page PDF.
Education Industry Merger & Acquisition Trends For Q3 2013
The industry’s largest transaction in third quarter 2013 was TPG Capital’s acquisition of TSL Education, a digital education publisher, for $549 million. Financial sponsors accounted for 23 percent of volume but 41 percent of transaction value year-to-date. In addition, six of the top ten highest value deals thus far in 2013 were backed by private equity firms.
Click here to read the two-page PDF.

Financial Technology and Information Industry Merger & Acquisition Trends For Q3 2013

As for the Payments segment, M&A volume experienced a 142 percent increase in the quarter, with a total of 29 deals. This came in the aftermath of a 50 percent decrease between first and second quarter 2013. Regarding strategic acquirers, the segment’s highest value transaction in third quarter 2013 was EBay’s acquisition of Braintree Payment Solutions for $800 million.
Click here to read the two-page PDF.

Cengage On the Verge of Chapter 11 Filing?

Third quarter revenues at Cengage improved to 5% better than last year and adjusted EBITDA was up a healthy 30% but YTD numbers remain off due to a bad first quarter and the real story behind Cengage's numbers is when, rather than if, the company will go into a pre-arranged bankruptcy so to re-negotiate their outstanding loan obligations.  Here is CEO Michael Hansen's prepared comments on the issue:

As you know, in March of this year, we retained restructuring, financial and legal advisors to assist the company as we review a range of options to strengthen our balance sheet and position our company for long-term growth and success.We are preparing to engage in discussions with our major financial stakeholders about constructive ways to reduce Cengage Learning’s debt obligations and improve its capital structure. Our goal is to put the Company on a stronger financial footing that allows us to support our strategic plan and invest in our future growth.We will seek to negotiate the terms of a comprehensive restructuring transaction with our key creditor constituents and quickly implement the restructuring plan. We may need to utilize the Chapter 11 process to help us implement such a plan.As numerous companies have demonstrated, the Chapter 11 process can be an effective way of achieving a fast and efficient debt restructuring with minimal disruption to the business, particularly where agreement is reached with key financial stakeholders on a plan, or the outlines of a plan, prior to the filing.No decision has been made yet.We are confident that whatever path we take with respect to our capital structure, it will not impact the quality and reliability of our product offerings and our high level of service.

Investor presentation (pdf)
Prepared executive comments (pdf)
Bloomberg

The company also took a goodwill impairment charge and here is CFO Durbin on that one:

Second, in connection with the development of our strategic plan we performed a comprehensive revision of our short- and long-term operating projections, including, but not limited to, key assumptions associated with forecasted industry trends and Company-specific forecasted revenue growth rates and operating margins. The revised forecast was completed and approved by our Board of Directors on April 18, 2013. The plan indicated a substantial reduction in projected revenues, operating profit and cash flows. Consequently, we determined that this constituted a trigger event for goodwill impairment purposes, and we initiated the test pursuant to generally accepted accounting principles (GAAP). Given the timing of the revised projections and the complexity of the required impairment test, we have not yet finalized our analysis. However,we recorded a preliminary goodwill impairment estimate of $2.8 billion during the third quarter.We expect to finalize the analysis during the fourth quarter of fiscal 2013, and any adjustment to the estimated impairment charge will be recorded during that period.

 

Media Banking Activity and Overviews: M&A Deals Doubled in 2012

Jordan Edmiston end of year m/a review (pdf) From the press release:

Burgeoning innovation, rising corporate investment and a year-end rush to beat the tax man drove robust mergers and acquisitions in 2012 for the media, information, marketing and technology sectors. M&A surged to 1,351 transactions for the year, or 50% more than in 2011, at a total value of nearly $75 billion, according to The Jordan, Edmiston Group, Inc. (JEGI) (www.jegi.com), the leading independent investment bank specializing in M&A advisory services across these markets.

This record-setting volume was driven primarily by smaller deals, as approximately 90% of M&A transactions were less than $50 million in value. However, 14 deals topped $1 billion for the year, including six in Q4.

Over 400 of these transactions closed in the fourth quarter, many in December, as sellers sought to beat the calendar on anticipated tax changes in 2013. Indeed, of seventeen transactions closed this year by JEGI, five closed the week before Christmas.

Investment in the interactive markets, including B2B and B2C Online Media & Technology, Mobile Media & Technology, and Marketing Services & Technology, continued to drive the bulk of M&A activity, accounting for 70% of all transactions for the year and 62% of value. Marketing automation companies were in great demand, with acquisitions by Salesforce, Adobe, Oracle and ExactTarget.

Continued growth in digital ad spending helped propel this avalanche of interactive M&A. Internet and mobile advertising revenue in the U.S. reached $9.26 billion in Q3, the largest quarter on record, according to the Interactive Advertising Bureau (IAB). These figures showed an 18% climb over Q3 2011 and a 6% increase over Q2 2012.

Randall Rothenberg, President and CEO, IAB, said, “These historic investments in interactive point to the strong results that marketers are receiving from digital marketing. It is a highly effective medium for interacting and engaging consumers, who are no longer passive, but are active participants in contemporary media online, through social media, and on-the-go with mobile.”

While interactive continues to grow rapidly, the broader media and information industry saw increases in M&A across more “traditional” sectors, such as B2B Media (up 143% in number of deals and nearly 8x in deal value), Database & Information Services (up 40% and 87%), and Exhibitions & Conference (up 56% and 94%).

Healthcare Information & Technology, another hot area of investment, saw M&A deal activity increase 86% in 2012, with more than $10 billion of deal value for the year. Chris Calton recently joined JEGI as a Managing Director to oversee the firm’s healthcare information and technology practice.

From Marlin Associates, their December update of media transactions (pdf). From the press release:

The end of another year is almost upon us. Following this letter is our December 2012 Market Update. As you will see, it provides our latest sense of M&A values, activity and trends for the dozen plus technology, information and healthcare sectors that we follow.
We hope your year has been happy, healthy and prosperous.
This month we saw sizable activity announced, including Knight Capital’s takeover offer from Getco that is valued as high as $1.8Bn. However, the vast majority of transactions were well under $200M, for example FICO’s acquisition of CR Software and Brady’s agreement to acquire Systems Alternative International. One theme we’ve observed is the increasing demand for middle- and back- office IT, as evidenced by the acquisitions of logistics software provider JDA Software and document capture solution provider Encore Imaging Systems.
Healthcare M&A activity continues to be strong as well, with certain transactions demonstrating notable patterns in the industry. For example, Humana has now joined Aetna (Medicity) and United (Axolotl) in purchasing an HIE vendor (Certify Data Systems). Dell divested of its healthcare RCM business to Conifer Health. And lastly, McKesson has had the most active few months in some years in purchasing a variety of HIT assets, most recently acquiring Emendo, a New Zealand-based software company.

Other notable deals include:
• Apollo Global Management agreed to acquire McGraw-Hill Education for $2.5Bn;
• RedPrairie Corporation agreed to acquire JDA Software (NASDAQ:JDAS) for $1.9Bn;
• Knight Capital Group (NYSE:KCG) received a takeover offer from Getco;
• Equifax (NYSE:EFX) agreed to acquire CSC Credit Services for $1Bn;
• Hearst agreed to acquire Milliman Care Guidelines;
• Nets Holding acquired Luottokunta for $209M; and
• MSCI (NYSE:MSCI) agreed to acquire IPD Group for $125M.

Berkery Noyes 3rd Quarter Update from October (pdf):

The most active acquirer through Q3 2012 was Apax Partners with 10 transactions. Four of these occurred within Q3 2012: Solarsoft Business Systems, RivalEdge, CWIEME Ltd, and ClaimLogic, Inc.
The largest announced transaction in Q3 2012 and year-to-date was The Carlyle Group's acquisition of Getty Images from Hellman & Friedman LLC for $3.3 billion.
Total transaction volume in Q3 2012 decreased by four percent over Q2 2012, from 119 to 114.
Total transaction value in Q3 2012 increased by 10 percent over Q2 2012, from $11.4 billion to $12.5 billion.
The median revenue multiple from 2011 through the 1st 3 Quarters of 2012 decreased by 28 percent, from 1.8x to 1.3x.
The median EBITDA multiple from 2011 through the 1st 3 Quarters of 2012 increased by eight percent, from 8.8x to 9.5x.

Who's Buying Whom - Third Quarter 2012 Reports firm Whitestone Communications

Who's Buying Whom reports for the Third Quarter 2012, the most complete reference on acquisition activity in the Internet, Information, Publishing and Training industries. Whitestone specializes in representing buyers and sellers of companies in these fields.

Click here to Download your report (September)

Veronis Suhler Annual Forecast (from September):

Spending within the U.S. Communications Industry will increase 5.2% in 2012 to reach $1.189 trillion as consumers and businesses increasingly embrace digital technology and return to spending levels not seen since before the recent worldwide economic downturn,
according to the 2012 Forecast released today by Veronis Suhler Stevenson (VSS), a global capital private investment firm targeting companies in the information, education, communications and business services industries in North America and Europe. 

The 26th edition of the VSS Communications Industry Forecast 2012-16 (www.vssforecast.com) found that U.S. Communications Industry spending grew 4.4% in 2011 to $1.129 trillion despite a sluggish economy in which nominal Gross Domestic Product expanded 3.9%. Spending rose at a compound annual growth rate (CAGR) of 2.7% in the 2006-2011 forecast period, surpassing GDP by a 0.3 percentage point. VSS expects the Communications Industry to grow at a 5.2% CAGR to $1.455 trillion by 2016, almost two times the growth rate during the past five years. At that pace, the Communications
Industry will remain the fifth-largest industry among 15 economic sectors in 2016.
Once seen as a trend in only selected pockets of the U.S. Communications Industry, digital
communications and services – encompassing content, technology and user access -- has firmly
established itself as the driving force of growth across all of its sectors, segments and subsegments.

Through the use of ever-evolving platforms and channels, digital is giving a rising number of
communications companies the power to more effectively target and connect with both consumer and business customers. Demand for digital and mobile devices continues to grow steadily, ensuring that there will be a similar increase in the number of end users. Traditional communications companies that relied heavily on print products continue to make the transition to digital, and those that fully embrace it are the ones most likely to remain relevant to their audiences.

Admedia Partners annual report isn't completed yet: AdMedia's 2013 Survey on M&A Prospects will be available in early 2013. To be among the first to receive the results, please join our mailing list.

Annual Veronis Suhler Stevenson Media Forecast

Some snips from the annual VSS media forecast:

“Digital’s influence is now a constant and significant factor in every sector, segment and sub-segment of the US Communications industry,” said John Suhler, Co-Founder and President of VSS. “At the same time as digital technology and innovation continue to spur growth in the industry or propel the communications industry forward, emerging digital media and services are significantly changing consumption habits among both institutional and consumer end-users. These developments will drive digital-related expenditures to constitute nearly 40% of the overall U.S. Communications Industry spending by 2016.”

In the Business & Professional Information & Services sector, spending will rise 7.2% to $204.43 billion in 2012 and post a 7% CAGR in the forecast period, fueled by solid growth in both Business & Professional Information and Business & Professional Services, particularly those relating to marketing, financial & economic and scientific & technical Information, as well as technology services, such as wireless data access, Software as a Service (SaaS) and cloud computing.

VSS projects spending on Education & Training Media & Services will increase 4.4% to $252.46 billion in 2012 and post a 4.2% CAGR in the forecast period. Solid gains in College Media and Outsourced Corporate Training will offset more modest growth in K-12 and declines in For-Profit Postsecondary Educational Services.

Spending on Entertainment & Leisure Media will increase 4.9% to $293.49 billion in 2012, with strong gains in Subscription TV spending expected to offset weaker growth in Entertainment Media and declines in Consumer Books. Steady growth in Subscription TV spending and a resurgent Entertainment Media will produce a 4.9% CAGR in the forecast period despite protracted declines in Consumer Book spending.

FT On Potential McGraw-Hill Break-Up

Reporting via mergermarket.com the FT suggests that the activist shareholders seeking to unearth greater value from their holdings in McGraw-Hill will face an up hill battle (FT).

McGraw-Hill has spent the last ten to twelve months receiving advice from a slew of media bankers, the industry bankers said. “Even if the activists have revolutionary ideas in mind, chances are it’s already been pitched to the management and considered under various scenarios,” the first of the bankers said.

And further comments on the education assets specifically:

McGraw-Hill has been receiving sales pitches for its education publishing assets, specifically its higher education textbook assets, the first and second bankers said.
These assets have drawn strong interest from financial sponsors like Blackstone and Hellman & Friedman and could fetch around USD 3.5bn in a sale, according to a lender following the situation. Both sponsors declined to comment.
Other sponsors with historical expertise in education include Bain Capital, KKR, Providence Equity Partners, and Warburg Pincus.
The approaches come as McGraw-Hill has been accused of being slow to respond to technology changes in the publishing business.
“They’re not playing in the back-office ERP (Enterprise Resource Planning) areas and student information systems that Pearson (PSON:LN) or GlobalScholar are playing in and that are higher growth margins,” said a third banker.
Pearson’s education sales jumped 7% and operating profit rose 16% last year based on public filings, meanwhile McGraw-Hill’s revenue and operating income for 2Q11 decreased 5.0% and 18.3%, respectively. Pearson, the owner of the Financial Times, is the parent company for this news service.
With McGraw’s education business not growing, it makes sense to consider a split of the business from the company’s profitable Standard & Poor’s ratings service, the industry bankers said.

More from the FT here.

Media M&A Reports

Investment advisory firm Jordan Edmiston reported their Q1 2011 review of M&A activity a few weeks ago (JEGI):

M&A transaction value for the media, information, marketing services and technology sectors reached $12 billion in Q1 2011, representing a 16% increase over Q1 2010. The first quarter of 2010 had seen an 83% surge in deal volume and a nearly seven time increase in transaction value over Q1 2009 levels. So, 16% growth in Q1 2011, off a large prior year base, reflects a healthy continuing M&A environment.

The interactive and technology markets accounted for an even greater share of activity, with the B2B and B2C Online Media & Technology, Marketing & Interactive Services, and Mobile Media & Technology sectors accounting for 75% of total deals in Q1 2011 vs. 70% in Q1 2010. The average deal size for these sectors rose as well, from $28 million in Q1 2010 to $47 million in Q1 2011.

Looking at the Top 10 Deals:
The interactive markets accounted for 7 of the 10 largest deals of the quarter, including the only multibillion dollar deal announced – eBay’s acquisition of GSI Commerce for $2.4 billion.

The other six announced interactive deals in the top 10 included:

• Walgreen acquired Drugstore.com, an online retailer of health and beauty products, for $409 million;
  
• Tencent of China acquired RiotGames, a developer of premium online games, for $400 million;
  
• Salesforce.com acquired Radian6, a social media monitoring company, for $326 million;
  
• AOL acquired Huffington Post, an online news and opinion web site, for $315 million;
  
• GSI Commerce acquired Fanatics, a network of sports e‐commerce sites, for $277 million; and
  
• Nordstrom acquired HauteLook, a private, limited‐time e‐commerce site, for $270 million.

Interestingly, two of the largest transactions of the quarter took place in the consumer publishing market, which has been a relatively quiet sector over the past few years:

• Hearst Corporation’s acquisition of Lagardère’s magazine portfolio for $651 million; and,
• Apax Partners’ acquisition of Yellow Media’s Trader Corp., a producer of consumer shopper publications, for $745 million.

The remaining deal in the top 10 for Q1 2011 took place in the fast‐growing healthcare market:

• inVentive Health, owned by private equity firms Thomas H. Lee and Liberty Lane Partners, acquired i3, a pharmaceutical services company, for $400 million.

Additionally, Marlin & Associates also circulated their deals overview for June 2011 which takes a wider view of activity and has some nicer graphs if you like that sort of thing (Marlin).

Blackboard in Play

Leading educational platform company Blackboard, that virtually invented the learning management system (LMS), has said it will consider placing itself up for sale. According to various reports the company has received multiple unsolicited offers for the company and thus has decided to retain investment council to determine their best course of action.

Shares soared as much as 35% on Tuesday based on the company's announcement and analysts began speculating which companies might bid for the educational services company. Immediately mentioned were publishers Pearson and McGraw Hill although these companies might find it difficult to continue a 'non-biased' version of the Blackboard platform as owners (at least in the minds of educators). Google was also mentioned as a potential buyer - possibly more likely given the company's recent comments about their future m/a plans. According to Feltl & Co analyst Scott Berg, "An acquirer can pay as high as 16-17 times the EBITDA ... I think somewhere between $50 and $57 (per share)" for Blackboard.

Share prices exceeded $50 which values the company at well over $1.3billion and Blackboard has retained Barclays Capital to advise them on their options.

Reuters

Take all of Springer

Springer CEO Derk Hannk is quoted by Reuters suggesting the entire company is in play (Reuters)

The private equity firms Candover (CDI.L) and Cinven [CINV.UL], the owners of German academic publisher Springer Science and Business Media, are considering a full sale of the company, Chief Executive Derk Hannk said on Wednesday.

"For a while we were considered underleveraged, now we are considered overleveraged ... a straight sale is the preferred option," Hannk told Reuters on the sidelines of the Frankfurt Book Fair on Wednesday.

"We are owned by private equity and they have had a very good run for their investment for five, six years," he said, adding it may be time for new equity.

Springer On the Block

The Guardian is reporting that private equity owners Cinven and Candover are seeking 'strategic advice' from Goldman and UBS with respect to a possible sale of Springer Science. Springer Science and Business Media is the love child of a combination of Springer and Kluwer back in 2003. At the time, it is believed the private equity owners were attempting to roll up several properties (including Informa) in advance of a listing.

Where they are now will be difficult to ascertain. Today, their business could be fairly stable but most executives I speak to who have significant revenues in the academic, library and media segments believe that this coming year and 2010 will represent real tests just to keep revenues from falling off a cliff. Any publisher with 'second tier' products is going to face a torrid time keeping their subscription base. It is the subscription model that has helped many of these publishers weather the storm thusfar; however, this will not last as library and academic funds are slashed.

Candover and Cinven will face a difficult task and if they want £2bn as the Guardian suggests then this will be a big ask. Everyone is familiar with the protracted Reed Business auction that was ultimately abandoned and while this is a different market the example is indicative of the risk-averse nature of the M&A market for media properties.

From the Guardian article:

Rival private equity groups are regarded as the most likely buyers, although the head of one competing venture capital firm said he thought it was unlikely Springer would attract much interest, given the poor short-term prospects for the global economy.

Media companies have also seen their valuations fall in the wake of a global advertising downturn. However, unlike other media groups, many of which are heavily reliant on advertising, Springer has a relatively secure source of revenue. It publishes more than 6,500 new book titles every year and owns 60 publishing houses in about 20 countries in Europe, Asia and North America.

The company employs more than 5,000 people and its British operation, based in Surrey, oversees the publication of 20 journals.

Springer has been (from the outside) fairly innovative with respect to eBook and new publishing models. They were one of the poster children for the Google Book program and professed to have seen impressive sales results from many older titles that they had given up on years before. Perhaps, the eventual buyer will be taking as much a flyer on Springer as they will be on the potential for the wider market to turn around in the short to medium term. Good luck with that.

Reed Business Sale and Choicepoint

The Financial Times reports that the price Reed may get for the sale of RBI will be far below their original expectation of £1.25Bill. In the article they quote someone suggesting a sale price of £750mm with the expectation that a sale would go ahead regardless.

The deal's financing is now in place but the sticking point is the deterioration in trading at RBI into 2009 as the economy weakens. Reed would not comment on a lowest acceptable price.

One analyst said: "I think it is worth Reed's while to sell low. If RBI went for £750m rather than £1bn, all they lose is £250m of cash. While it is helpful to have that on the balance sheet, at the end of the day it is only £10m of extra interest.

"The alternative is that . . . the market automatically values RBI in the sum of parts at £750m-£800m anyway and you get left with a cyclical business that will see downgrades and will be under pressure for a couple of years."

There are three groups with a serious interest but the article does not indicate when a sale will be announced. Reed will be pressing for a resolution as soon as possible.

In other related news, the Federal Trade Commission is requiring that Reed divest some part of Choicepoint in order for approval of the acquisition to proceed. The FTC believes that the combination of the Reed and Choicepoint public record business would diminish competition significantly and as a result Reed is being required to sell a part of this business to Thomson West. (Link: From September press release)

To eliminate the anticompetitive effects of the proposed acquisition, the FTC will require Reed Elsevier to divest assets related to ChoicePoint’s AutoTrackXP and Consolidated Lead Evaluation and Reporting (CLEAR) electronic public records services to Thomson Reuters Legal Inc., within 15 days after the proposed acquisition is consummated.

Through its LexisNexis division, Reed Elsevier provides electronic public records services to law enforcement customers in direct competition with ChoicePoint’s AutoTrackXP and recently, ChoicePoint’s CLEAR, a new and advanced electronic public records service. Together, the two firms account for over 80 percent of the approximately $60 million U.S. market for the sale of electronic public records services to law enforcement customers.

“The proposed acquisition would have eliminated the intense head-to-head competition between LexisNexis and ChoicePoint that has lowered prices and led to product innovations for a critical law enforcement tool,” said David P. Wales, Acting Director of the FTC’s Bureau of Competition. “The action announced today ensures that law enforcement customers will continue to benefit from this competition as they attempt to keep pace with increasingly sophisticated criminal activity.”

Springer Buys BioMed Central

Just announced from their press release. Looking forward, Springer may be the perfect (only?) partner to continue the experiment with Open Access and ensure BioMed remains true to its purpose.

Springer Science+Business Media has reached an agreement to acquire BioMed Central Group, the leading global open access publisher.

BioMed Central was launched in May 2000 as an independent publishing house committed to providing free access to peer-reviewed research in the biological and medical sciences. BMC is the largest open access provider in the world with over 180 peer-reviewed journals.

BioMed Central’s flagship journals include Journal of Biology, BMC Biology, BMC Medicine, Malaria Journal, BMC Bioinformatics and Genome Biology. BioMed Central has revenues of approximately EUR 15 million per year. The company is based in London, with a second office in Liverpool, and has approximately 150 employees.

Derk Haank, CEO of Springer Science+Business Media said: “This acquisition reinforces the fact that we see open access publishing as a sustainable part of STM publishing, and not an ideological crusade. We have gained considerable positive experience since starting Springer Open Choice in 2004, and BioMed Central’s activities are complementary to what we are doing. Additionally, this acquisition strengthens Springer’s position in the life sciences and biomedicine, and will allow us to offer societies a greater range of publishing options.”

Matthew Cockerill, Publisher of BioMed Central said: “We are very excited about this new phase of BioMed Central's growth and development. Springer has been notable among the major STM publishers for its willingness to experiment with open access publishing. BioMed Central has demonstrated that the open access business model can work, and we look forward to continued rapid growth as part of Springer. The support of our authors, journal editors and institutional customers has been vital to BioMed Central's success and we will continue to focus on offering the best possible service to these groups."

Peter Suber of Open Access News as more thoughts: Link

Greenwood To Close

On the heals of the deal by Harcourt to sell perpetual rights to the Greenwood list, the company will vacate its offices in Westport CT by year end. According to WestportNow, a company source has told them that approximately 150 positions will be lost when the pink slips go out in December.

ABC-Clio Acquires Greenwood Publishing Rights

In a deal announced this morning, Houghton Harcourt Mifflin has agreed to grant ABC-Clio a perpetual license to use the imprints and publish the titles of Greenwood Publishing Group, including Greenwood Press, Praeger Publishers, Praeger Security International and Libraries Unlimited. The announcement goes on to say HHM will transfer certain intellectual property, contracts and assets to ABC-CLIO and that the agreement is effective immediately. Terms have not been announced.

From the announcement:

"By combining Greenwood Publishing’s impressive and extensive list of titles with our experience in publishing widely respected databases, reference books and eBooks, ABC-CLIO is expanding its role as a leader in the publishing industry,” said Ron Boehm, CEO, ABC-CLIO. “We believe that we will launch the next generation of high-quality reference, professional development and other resources for education and libraries.”

This looks like a good deal for ABC-CLIO. They gain a strong list of reference titles, a reputable publisher with a history of stable consistent operations and a reliable brand particularly in the library and educational community. Greenwood was part of Reed Elsevier for many years and was incorporated into the Harcourt business unit after Harcourt was purchased by Reed. That business was sold and Greenwood ended up at HHM.

Perhaps this is how deals will be done in the short term to compensate for the lack of credit.

Voyager Learning Company First Half 2008 Update

No SEC filing for the first half which is becoming something of a broken record for Voyager. The company held a conference call for investors which did motivate some analysts to participate in contrast to some prior calls.

Read it in full here.

Following are some selected quotes and those about the potential sale and valuation of the business are interesting.

Brad Almond

With that said, when we last provided an update via our July 22 press release, we anticipated that we would file our 2006 10-K by July, 31, 2008. We have obviously slipped from that target. We are in the final stages of preparation for the release of the 2006 10-K and expect to have it filed before the end of this month. We expect to file our 2007 10-K approximately four to six weeks after the filing of the 2006 10-K. We have been preparing the 2007 results and audit work in parallel with 2006 efforts and such work has been progressing very well to date.

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Doug Asiello – Invesco

Hoping you would help me through what the implied free cash flow for your – for the firm will be, so let me just show – let me walk through my math and you can tell me where I am off. So that $19 million your current cash, $45 million from the tax refund, $25 million in operating cash flow, gives you about $89 million, less the uses of cash $5 million from the settlement, $4 million from the wrap-up of the legacy corporate, $3 million from the shut down of the headquarters. So if you expect to have $70 million at year-end, by my math you are generating about $20 million in free cash flow. Is that wrong?

Brad Almond

You are essentially right. We’ve – the math you’ve done, you add up all the pieces and our range would be – these are actually out at the highs and lows, all those ranges that I gave, you probably see something more in the $73 million to $83 million—

Doug Asiello – Invesco

Yes.

Brad Almond

But however to account for any unknowns out there and therefore I gave a range of $70 million to $80 million.

Doug Asiello – Invesco

Alright. Okay, so let me ask a followup then. My enterprise value for your firm is roughly $100 million and you are generating $20 million in free cash flow. That’s five times free cash flow. And then I guess if you layer in SG&A cost and corporate overhead, I have a hard time believing there is not some strategic buyer out there that hasn’t thought that this is – this would be very easy to wrap – to roll up into their existing franchise and sales force at – and then kind of wipe out a good chunk of SG&A and corporate overhead at a extremely inexpensive valuation. What’s wrong with my analysis?

Informa Bid Disappoints

The Private Equity bidders looking to grab Informa have been told in no uncertain terms to sharpen their pencils. On the basis of initial interest that pegged the value of the company over £2.obillion, the formal offer made today is significantly lower. The Times reports that the Blackstone, Carlyle and Providence Equity bid of £1.87Billion is much lower than what management expected when they allowed prospective bidders to look at their books:

The source said: “Nothing at all has changed since July to make the company believe its worth has fallen so by so much. The board agreed to open its books at an offer of 506p and that is what they think it’s worth.”

Derek Mapp, Informa’s chairman, said: “The board believes that the revised offer significantly undervalues Informa. Informa has attractive future prospects and is continuing to deliver growth across the business even in the face of a weaker economic environment.” The company confirmed that it had continued to trade in line with its expectations. Shares in Informa closed down by almost 8 per cent at 414½p yesterday.

If a deal is to be done, then this consortium looks most likely to complete it; however, it is likely that negotiations will result in only a slightly higher price if the deal goes down. There doesn't appear to be any other bidders although having said that perhaps others on the sidelines will be encouraged by a slightly lesser price.

Informa Bid Likely to Go Ahead

Reuters is reporting that Carlyle has secured financing for the acqusition of Informa. From the report:

Carlyle and Providence have now assembled a group of around twelve banks to provide a leveraged loan of around 1.5 billion pounds that will finance the purchase, along with a large equity contribution, several senior bankers said. "On the Carlyle side the financing is in place. The financing is already largely done," a senior leveraged banker said.

The report goes on to suggest that a competing bid/financing package might be unlikely given that some of Informa's existing banks are included in the financial team Carlyle has organized and the general difficulty in getting financing for any deals is problematic at this time.

Bertelsmann Interested in Reed Business

Reuters reports that Bertelsmann's magazine unit Gruner & Jahr maybe in the mix to acquire the RBI unit from Reed Elsevier. Reuters learned of the tip via a German newspaper. In the report, Reuters also notes that indications of interest for the RBI business unit have been received and offers range between £1.0bill and £1.25bill. If correct, this range appears to match Reeds initial expectations for the deal. Reuters expects final bids to be submitted in October. Followers of Bertelsman may recall they have created a sizable fund with some PE companies with the express view to make some large (or one very large) deal. They objective was to be able to participate in the bidding process for these large media deals and not be priced out by pure PE deals. As a case in point they were very interested in the Cengage auction last year and by some accounts came quite close.

Reuters

Forrester Buys Jupiter

Forrester Research (Nasdaq: FORR) (http://www.forrester.com/) has acquired JupiterResearch, LLC (http://www.jupiterresearch.com/) and its parent company, JUPR Holdings, Inc., from MCG Capital Corporation (Nasdaq: MCGC) (http://www.mcgcapital.com/) for $23 million in cash plus assumed liabilities, subject to post-closing adjustments. (JEGI reports).

JupiterResearch has 83 employees and 2007 revenues of approximately $14 million. Forrester, with 2007 revenues of $212 million, now has more than 1,000 employees. This strategic purchase complements Forrester’s syndicated business model, as JupiterResearch joins Forrester’s Marketing & Strategy Client Group, which contributed $46.4 million to Forrester’s total revenue in 2007.

“Uniting JupiterResearch and Forrester brings together the two leading research brands used by marketing and strategy executives,” said George F. Colony, Forrester’s Chairman of the Board and CEO.

McGraw Hill Plotting to Buy RBI

The Telegraph handicaps some of the interest in the sale of Reed Business information and offers the intreging notion that MGH would purchase the Reed titles. What they don't discuss is what would happen afterwards. As I have speculated, some assets are likely to be sold after a sales of RBI and this article compares the 'overlap' between the RBI titles and those currently owned by MGH.

The McGraw Hill Companies, owner of Standard & Poor's credit rating agency, has titles which overlap with RBI in aviation and construction. McGraw publishes aviation Week and a collection of architectural and engineering titles, while RBI has a large portfolio of construction titles including Construction News and Professional Builder.

And:

The sale of Reed Business Information (RBI), whose titles include film industry bible Variety, Flight International and New Scientist, began last week when information was sent to prospective bidders. If RBI fetches the asking price, it would be the biggest media takeover since the sale of Emap at the end of last year.