Monday, January 11, 2010

GMG are reported to be prepared in principle to inject more money into EMAP. EMAP is at real risk of breaching its banking covenants so although GMG are signalling their intent to stump up cash is for acquisitions, more cash may be needed to prop up the balance sheet and avoid an expensive renogotiation of banking agreements (which GMG are reported to have rejected as an option.) Elswhere there have been rumours that GMG will sell recently acquired PAid Content to raise cash. SO GMG has yet to make clear what ots own future strategy looks like and that means it is unlikely there will be any quick decisions about the future funding of EMAP. Potentially that is serious as in todays market delay in strategy clarity brings the day of reckoning closer. So there is a big difference between an "in principle" offer of cash and any cash being available. What EMAP has yet to demonstrate is that it has a compelling plan to build value in its business. It has and continues to take costs out. It has flip flopped on paid content strategy and there is little evidence that its current pay wall strategy is radical enough or innovative enough to crack the problem.

GMG are committed to paying down debt before taking any profits and will have to take a very long view. They have yet to right off their equity stake in EMAP (as APAX has already done) but they will surely have to.

Emap could consider selling off assets and hunkering around construction where they have a good data business and there may well be interestingfuture acquisition opportunities, and fashion, where they own WGSN and a selection of trade shows. This would make a manageable platform around which to build. Be brave, be brave.

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