Reed Speculation

Via the Independent (UK), an investment analyst is suggesting that Reed Elsevier is under-valued and that a PE bid could push the share price up 85% higher than yesterdays close of 619p.

Collins Stewart adds that, with a current debt weighting of just 1.4 times earnings, Reed is under-leveraged and if it does not gear up its balance sheet "maybe private equity will do the job instead". The broker estimates at a debt multiple of 8 times earnings the shares could be worth up to 1,147p

Once the sale of Harcourt is done perhaps some activity will heat up. I see them being very interested in Bureau van Dijk as it would fit nicely into their legal and regulatory segment. Interestingly, the international spread of BvD could also aid Reed in expanding legal and regulatory into wider global penetration with new products and data/information.

Media Deal Confusion: But Lots of Them

From Financial News Online (US) there were 282 disclosed deals valued at $114.6bn (€87.3bn) in the entertainment sector in 2006 according to PricewaterhouseCoopers , marking the best year for M&A in the media and entertainment sectors since 2002, when there were $118.6bn of mergers done. According to PwC the outlook for 2007 looks stronger, with a backlog of 132 deals worth $103bn. Those deals, which have been announced but not completed, include the proposed buyouts of Clear Channel and Univision,valued at $26.7bn and $13.5bn.

Given the activity that folk in the publishing and business information segment have seen in the past 12mths, it is no surprise that the numbers year on year look impressive. Two very active investment banks in our sector also publish annual reports on their views of the business. (Veronis Suhler also active in this space publishes a fat annual report which is sold so I didn't access it).

In their report presented in January The Jordan, Edmiston Group contended that there were 621 deals worth $57.3Billion in 2006 and 542 deals worth $54.0Billion in 2005. The JEGI report covers 11 media segments with Marketing and Interactive Services with 138 deals and Online media with 174 deals leading the way. A short synopsis of each segment and the notable deals for each is also presented in the report. By way of forecasts, they only project what they expect to see happen in the trade show space which increased in the number of deals between 2005/6 but saw a decrease in the value of total deals. (In each of their periodic reports they pick a segment to forecast and more of these past reports are on their web site).

Desilva and Phillips has also done considerable business in the past year - by their own admission more than their pessimistic 2005 forecast - and while the numbers are again different from those above they do show impressive growth. From Desilva and Philips 2006 Market Report there were 151 deals worth $20.5Billion in 2006 and 115 deals worth $6.0Billion in 2005. They do take a look into the future:

Just as the economic outlook continues – even improves – in 2007, we see a continuation of a great deal market. We expect the number of deals and the dollar volume to continue – at least – at the record level of 2006. We are also aware of a very full deal pipeline. We expect to see more public companies going private, just as Reader’s Digest did – and it’s not just Sarbanes-Oxley. As we’ve seen, media executives now know that they need to transform their companies into platform-neutral content enterprises combining strong traditional and new-media distribution channels. But to do this makes it even more difficult to manage earnings from one quarter to the next, as the public markets demand. One result: the solution offered by buyout firms looks ever more attractive.

The outlook for M&A in 2007 is as good as we’ve ever seen. All the pieces are in place: availability of funds, favorable interest rates, eager buyers without the time to build rather than buy, brands that need to find new delivery platforms, and a regulatory climate that all but deliberately discourages new companies from going public and existing public companies from controlling their own fates. There is yet another population of buyers perhaps waiting in the wings – European media businesses newly flush with a strong Euro and, finally, thriving domestic markets. To say we’re looking forward to the excitement is an understatement.

No matter how the numbers are tabulated, given the activity already announced at the tail end of 2006 and the first quarter of 2007 it is hard to see 2007 not being a banner year for M/A activity in the media space. Already Wolters Kluwer education has gone for over $1.0billion, Veronis (Private Equity) has purchased Advanstar for over $1.obillion and Houghton Mifflin has been purchased by Riverdeep. In the wings are expected $4-5Billion deals for Thomson and Harcourt and $1.0billion for Bureau van Dijk. If Pearson or Reed are gobbled up by PE then it really will be a banner year.

There is a key comment in the above forecast which studiously points out that some very big and seemingly sophisticated media companies still have a lot to do to re-make their companies into 'new-media' content providers and not print companies. Five years hence the companies purchased by private equity will burst forth into the public markets in almost unrecognisable form having gained the flexibility to transform their companies into true online and new media players.

Deal News: Bureau van Dijk On the Block

The Daily Telegraph is reporting that Bureau van Dijk has hired LongAcre Partners and Goldman Sachs to review the company's strategic options. Generally a prelude to a sale.

Industry sources said Bureau van Dijk is likely to generate bidding interest from business information publishers Reed Elsevier, Reuters, Pearson and Incisive Media, which was last year acquired by private equity firm Apax. US bidders such as Dow Jones & Co, publisher of the Wall Street Journal, Standard & Poor's owner McGraw-Hill and Factset are also likely to be interested.

BvD was sold to Candover a number of years ago when the founder and owner sold 60% ownership. Senior management own the balance of the stock. The company publishes business and company information on millions of companies (private and public) around the world. From their web site:

We provide detailed, analytical databases, for in-depth research, such as AMADEUS (a pan-European database), ORBIS (33 million companies around the world) as well as extensive country-specific databases (FAME, DIANE, DAFNE). These products are ideal for in-depth research of individual companies, identifying
companies complying with specific criteria plus detailed analysis of company
peer groups and benchmarking. In addition, our ZEPHYR database covers M&A
deals and rumours around the world.

The Telegraph suggests the company could be worth over $1.1billion; however, financial information is sparse and this company could be a one of a kind deal given the value of the type of information it collects and the depth of its databases.

Bloomberg LP

The NY Times has a short item regarding the $20Bill Fortune valuation of Bloomberg LP. In happy news to all the potential operating company acquirers, when Bloomberg is asked if he could watch the company be acquired by private equity he says no. There is no indication that a sale is in the works (an offer was rumoured last year) and other than the unlikely event that Bloomberg will run for President it doesn't look like anything will change until he has finished his term as Mayor. As The Times alludes, real numbers are hard to confirm but with operating margins of 30+% and a commanding market share this could be an expensive purchase for someone; whether it would go for the multiple Fortune suggests is hard to believe but I am prepared to be surprised.

With the cash that Bertelsmann, Reed and Thomson have or will have there could easily be some competition for this one in the next 6-18mths.

BookExpo America Conference Agenda

The pre-show education and seminar program has been announced by BookExpo America and I wanted to draw attention to my contribution. A few months ago, I thought it would be interesting to hear from some publishers who are using blogging to get their message out and to understand the issues, surprises and successes. The organizers have used my idea to build a program around this theme and I hope you will join us and support the rest of the program.

Here is the day/time and description of the seminar. As you can see, I will be supported by a purposely divergent group of publishers.

Thursday, May 31, 2007
2:30 – 3:30 PM
1E04
Corporate Social Media Platforms: A Case for Publisher Participation
Corporations in all industries are experimenting and effectively using social networking tools to build product awareness, communicate and converse with customers and experiment. In the publishing environment, books provide an easy platform for the many individual consumer and author blogs that exist – and there are many – but what of the publishers?
For publishers, the question is not whether they should be involved in social networking activities (blogs, RSS, podcasts, etc.) but HOW should they go about experimenting and launching effective social network programs. This session provides an overview of the activities of various publishers and provides a window on their motivations, successes and expectations. Audience members will hear how these publishers are creating a ‘social’ identity to leverage their brand, content and authors and support marketing and sales goals.

Moderator: Michael Cairns, Information Media Partners
Panelists:
Karen Christensen, CEO, Berkshire Publishing
Jimmy Behrle, The Overlook Press
Mike Hyatt, CEO, Thomas Nelson
Carrie Kania, Publisher Harper Perennial, Harpercollins

London Bookfair

LBF starts a week on Monday and I shall be there. Let me know if you would like to meet at the show or later in the week in London. I am looking forward to it and perhaps will report on some of the sessions I plan to attend and whatever else I hear about during the week.

Email: michael.cairns@infomediapartners.com

Richard Dawkins: The God Delusion

Well it is Easter weekend and I thought appropriate to mention that I just finished The God Delusion by Richard Dawkins. The book is only one of several the author has written over the years and if they are as readable as this one they might be good to look for. This book is very entertaining and believable (although I suspect if you are staunchly religious you might not think the latter), and the writing style is less heavily dogmatic than it is conversational. It makes fairly easy going even though some of his arguments are complex. Here is an short interview with him on the UK news show Newsnight.


The title has been out for months and is a best seller in the US and UK, and it may have tapped a nerve with respect to the increasing representation of religion in politics and political life. It is interesting to read that he makes an assertion (as other writers cited by him have also concluded) that many of early leaders of US political life (notably Jefferson) were probably atheists. Given this shared perspective that the founding fathers had in creating the constitution I wonder what they would think about the current mingling of religion and government - not just here but all around the world.


Lastly, I am unsure of the motivation for the design of the US book cover but I was struck by the association with the (stupid) mirror on the cover of Time's Person of the Year issue. The God Delusion has a bright silver mirror like cover and in reflecting your image to you it seems to emphasise Dawkins view that "we make our our purpose in the world" and our purpose and morality in life should not governed by organized religion.


Dawkins website