Shareholder Opposition May Hold Out for Company Split Instead
Amsterdam, Netherlands — During a late meeting this past Wednesday, the supervisory and management boards of VNU NV, the Dutch media and information company, agreed to accept a EUR 7.5 billion ($8.9 billion) buy-out from a consortium of six companies. The consortium is controlled by a private-equity group consisting of affiliated funds of AlpInvest Partners NV, The Blackstone Group LP, The Carlyle Group, Hellman & Friedman LLC, Kohlberg Kravis Roberts & Co. LP and Thomas H. Lee Partners, LP. Robert Krakoff, who heads up private investment company Blantyre Partners, which is backed by consortium member Blackstone Group, is involved in negotiations through Blackstone. He formerly headed Advanstar Communications, was Vice Chairman of Reed Elsevier Inc. and Chief Executive of Reed Exhibition Companies. If the sales goes through, Krakoff is expected to have a key management role.
However, the deal requires 95 percent of shareholders to agree to tender their shares, and VNU’s shareholders may not tow the line.
Just four months ago, a group of company shareholders, primarily American institutions, blocked a $6.8 billion (EUR 5.7 billion) bid to buy IMS Health Inc. in November. Shareholders opposed to the current buyout believe the bid undervalues the company and that greater value can be realized by splitting VNU’s three divisions, restructuring them and then selling them. The three divisions are marketing information (ACNielsen), media measurement and information (Nielsen Media Research) and business information (print publications such as Adweek, Billboard and The Hollywood Reporter and shows such as GlobalShop, Hospitality Design, Medtrade and ShoWest). Michael Marchesano is president and CEO of VNU Business Media. Greg Farrar is President of VNU Expositions, a division of VNU Business Media.
Before agreeing to the offer on Wednesday , however, VNU’s board evaluated a break-up and determined that it was not as attractive an offer. Reasons included uncertain completion, loss of economies of scale, adverse tax effects, negative client reaction and distraction or disruption cost. Another reason, not listed, was the fact that no one ever actually made such an offer. Both VNU’s supervisory and executive boards have urged shareholders to accept the current buy-out offer.
Even so, the Washington Post notes that two shareholders, Knight Vinke (which holds around 2 percent of shares) and Fidelity Asset Management (which holds 15 percent) are unlikely to support the bid. Fidelity alone has the ability to kill the deal.
Speculation exists as to whether VNU stock will retain its current level if the deal falls through — its rise since November could be attributed to the prospect of a sale. Independent observers also wonder if the breakup of the company for sale into three units will really give shareholders more money or if they are just posturing so that the consortium will up its offer.
The deal is an all-cash offer for all of the issued and outstanding common shares and all of the issued and outstanding 7 percent preferred shares of VNU NV, with a price of EUR 28.75 ($34.24) per common share and EUR 13.00 ($15.48) for the 7 percent preferred shares.
The offer is based on a multiple of 13.4 times 2005 normalized EBITDA (adjusted for IMS and IRI settlement costs and book gains) and a 23 percent premium over VNU’s closing price on July 8, 2005, the last trading day prior to the company’s announcement of its planned merger with IMS Health. The aggregate value of the transaction is approximately EUR 8.6 billion ($10.3 billion), including net indebtedness. VNU will not declare or pay any dividends on its common shares.
Aad Jacobs, chairman of VNU’s Supervisory Board, says, “The all-cash offer provides shareholders with an attractive price that fully reflects the independently assessed fair value of the company.”
VNU’s 2005 performance report reveals 2005 revenues of EUR 3.5 billion ($4.2 billion), up 4 percent from 2004; EBITDA of EUR 587 million ($699 million), up 2 percent from 2004; earnings per share of EUR 1.00 ($1.19); and EBITDA as a percentage of revenues of 17.0%, compared to 17.4% in 2004.
If shareholders approve the deal, it will be subject to regulatory approvals and other closing conditions.