Market sceptics have done a pretty good job of talking down the price of publishing and exhibitions group Informa after rival United Business Media terminated merger talks earlier in the week. Down 9 per cent on Wednesday, the stock was off another 7 per cent on Thursday. One or two of London’s more active speculators are said to have lost a finger or two along the way.
The conventional wisdom that has sent Informa lower has it that an alternative bid from Providence Equity, a US buyout group, will struggle to attract financing.
But the conventional thinking seems to be 100 per cent wrong on this point. The debt markets are not in fact shut to private equity.
Providence has actually lined up Goldman Sachs as its lead bank, FT Alphaville understands, along with both ING and JPMorgan. The advisory team is being led by James Seagrave at JPM. Jefferies and Freshfields are providing advice.
The debt package runs to £1.85bn, some £1.25bn of which involves refinancing Informa’s existing facilities. Providence is prepared to pay terms of libor plus 375bp for £1.39bn of senior debt, with a high yield top up of £463m costing 11.75 per cent.
At completion, the debt/ebitda multiple is projected at six times.
In fact, Providence’s planning appears to have been far more detailed — and is much further advanced - than has so far been acknowledged, according to sources with a close knowledge of the bid preparations.
The deal, being led by Providence UK managing director Gus Schwed, is being planned under the code-name Project Isobar, with Providence referring to itself as “Pascal.”
And the PE firm’s preparations have all been carried out at an indicative bid price of 550p - giving Informa a market value of £2.34bn, or £3.64bn including debt. That might sound toppy when Informa stock is trading at 400p, but Providence seems keen on both keeping Informa’s management, led by Peter Rigby, on side, and keeping other potential counter-bidders at bay.
Providence is said to have teamed up with Carlyle Group as a bidding partner, but we now know that the firm also discussed a joint bid with Blackstone and Hellman Friedman. Indeed, while a go-it-alone offer might have been the simplest approach, Providence has also looked at a joint break-up bid with either Springer, Informa’s rival which is now owned by Cinven and Candover, or with Apax, which has its own extensive portfolio of B2B publications.
A sale of Informa’s academic and scientific division has been discussed as one way to help finance a deal - with Springer and Wiley seen as keen potential buyers.
On the financing side,
Will a deal finally materialise? Our guess is that the prospect is rather firmer than the market realises.
Related links:
Bid finance fears lead to 9% fall in Informa’s shares - FT.com story
UBM and Informa - Lex
