Timing is everything in business. Ten years ago, UBM (UBM) – then United Business Media – attempted to engulf its smaller peer, Informa (INF), to create a £3bn media and exhibitions group. Financial crises, media digitisation and private equity interest got in the way, breaking down the merger talks and forcing both companies to spend much of the past decade streamlining and readying themselves for the digital age.
Now, with both portfolios in good shape, the bigger group – today, Informa – has taken another shot at the merger. This time, UBM’s investors are being offered 163p and 1.083 Informa shares, meaning they will own 34.5 per cent of the enlarged group. The deal values the target’s shares at a 30 per cent premium to the 30-day volume-weighted average share prices of the two groups the day prior to the offer announcement.
There is certainly sense behind the combination. Together, UBM and Informa will have a much stronger global presence, which will help them meet growing customer demand for wider international reach. They will also gain some ground on Relx (RELX) – the Anglo-Dutch giant that has dominated the media space thanks to its impressive portfolio of events and digitally-focused publications.
However, the potential financial benefits don’t appear to justify the premium Informa is set to pay. There are likely to be savings from closing headquarters, eliminating duplicate back-office functions and increasing purchasing power, but Informa’s investors don’t seem to think this will be enough to offset the financial risk of a takeover of this scale. The shares dropped 8 per cent on the day the deal was announced. The proposition is particularly hard to stomach given the amount of time and money Informa has spent realigning its portfolio in recent years. Plus, the aspiring buyer’s net debt was a worrying 2.8 times adjusted cash profits at the end of June 2012.
