Banks Take the Helm At Incisive

The FT reported yesterday that the banks who leant the debt that enabled Incisive Media to grow like topsy are in deep talks with Apax and the management about what to do next. Although Apax want to retain some equity and are prepared to put some more money into the pot the banks appear to have lost patience and now own Incisive in all but name.

You can bet that the FT numbers are not 100% correct but it looks as though Apax will end up being diluted from owning around half the business to owning about 2% of it. The management are keeping something north of 10% (which is a lot given that the banks have lost hundreds of millions and Apax lost its shirt. This isn't a done deal yet and things could yet change.

We should be interested not only because Incisive is a big b2b player but also because we as tax payers own RBS, the main lender. I am sure we all want Tim Weller and crew to make some more money, but lets hope not too much of it is ours.
;-)

Incisive breaches Covenants

Incisive Media breached its bank covenants in December. With £400m of debt and weakening trading the options are limited. Either Apax will have to inject more capital or there will be a debt for equity swap.

Either way all media businesses with high leverage will be sweating. On smaller deals banks have been prepared simply to rewrite the covenants (for a fee) but on this one, the bank will want to make sure it does nothing to increase its risk exposure.

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Wilmington Could get Sold to HG Capital

The Telegraph reports that Wilmington is poised to receive bid interest from private equity firm HG Capital. Other mid market players, such as Centaur, could generate interest too says the Telegraph.



Like all media stocks, Wilmingtons share price has suffered of late, despite turning in profit growth. Wilmington has also reduced its dependency on magazine advertising by selling off mags. There is still much to do though to turn Wilmington into a powerhouse media company. I have no doubt that CEO Charles Brady looks enviously at the privacy enjoyed by APAX owned, Incisive Media as it wrestles with the new paradigm.



This kind of public to private transaction will likely only happen with the support of management. If Brady and his Board want this to happen and a believable plan can be constructed then it will. If Brady is hostile to HGC it won't.



Interestingly Centaur is more of a bargain than Wilmington. About the same size as each other Wilmington trades on a p/e of 16; Centaur trades on half that. Put another way the market value of Wilmington is considered to be 8 times its 2007 profit. Centaur is today valued at just 4 times last years profits. This reflects the work that Centaur has yet to do, and Wilimington has already started, to move the business from magazine dependency to professional information solutions.



Heres a thought. Buy Wilmington and then buy Centaur, strip out all the duplicate costs (perhaps £10m) and replicate the events/training expertise of Wilmington in the Centaur business. Both businesses have useful positions in the legal sector too.



Assuming you share the benefits of the cost saving between the two valuations the implied value of Centaur, based on todays share price is just 2.6 times post merger profits.



So pay a 30% premium on todays price for Wilmington and twice todays price for Centaur and what do you have? A combined business with a turnover of £170m, profit of £47m acquired for a blended price of 7 times earnings.



I am not sayng these are the right prices to bid, but it does illustrate that something is do-able if all the parties are willing.



Oh and one more unconnected thing - a little bird tells me that a big announcement is about to go down tomorrow - Tuesday - at a major b2b media house. My bet is on a swathe of redundancies at.......

EMAP abandons Carter for Gilbertson

The appointment of Informa founder David Gilbertson to the role of EMAP Business CEO must have come as a bitter blow to the incumbent, Derek Carter. He must have mused that when GMG/APAX decided not to proceed with the merger of Incisive Media and EMAP, that his position was secure - at least for a while.

There activity in the headhunting world and it was an open secret that there was a process going on to appoint the CEO, but Carter must have assumed he was a certainty. Gilbertson is a a mature and experienced exec, turing Informa into one of the worlds leading business media houses. Nevertheless this is a challeng of a different kind. EMAP execs don't take kindly to outsiders and don't like being told what to do. It will be sporty.

EMAP may not be dead - yet.

It is being reported that the credit crunch has scuppered, at least temporarily the Apax backed merger of Emap Business and Incisive Media. To merge the two businesses would require refinancing debt already on Incisives balance sheet - and the credit crunch means that would be on less favourable terms than the deal currently in place. Also, the new deal would require more equity and less debt than previously thought as the banks play very cautiously in the new "sub prime" world.

In practical terms this means that Incisive and Emap will operate seperately - at least for the forseeable future. Of course the deal to acquire Emap is not closed and Apax still have to place all that debt requirement. I have no doubt they will be confident - but what happens if they can't?

EMAP Dead

I know this happened a while ago, but it can hardly pass without comment. It does seem extraordinary that the management of a business with the money and resources of EMAP and its extraordinary brands can think of nothing better as a strategy than flogging it all off.

Still, a good price was achieved for shareholders I suppose. It does appear though that APAX have been good as their word in backing their buy and build strategy around Incisive Media. On the assumption that EMAP Business becomes an integrated part of the Incisive operation, Wellers empire is now one of the biggest B2B groups in the world. This will be a substantial test of Wellers management. He has no experience of runnning an enterprise of this size and will need a strong second tier management team.

And on a final note, just because its big doesn't mean there is any point to it. I would love to hear a clear strategy description for the new enlarged business - but now Incisive is a private business I suspect we won't.