Steve Monnington, managing director of Mayfield Media Strategies, writes about ‘Dealmakers‘ in the January 2018 edition of Exhibition World. His column looks at exhibition sector news, namely the UBM/Informa merger.
Exhibition sector news has been dominated by the announcement that Informa and UBM are in talks which would see Informa acquire UBM for a mixture of shares and cash. Given deadlines, by the time this column appears it may all be over or it may be going ahead – we just don’t know. The announcement, made on 16 January, was forced on the two exhibition giants by a sudden and unexplained upwards movement in UBM’s share price.
The next day both companies announced the terms of the deal suggesting an agreement had been well advanced, but that they were not quite ready for an announcement, so were somewhat on the back foot. Ironically UBM EMEA held their 2017 company kick-off meetings – leadership conference, awards and party – for the two days immediately following the announcement.
The shareholders were also unprepared for this. Given that the terms of the deal put a premium of 30 per cent on UBM’s share price, it was unsurprising that UBM’s shares initially surged by 20 per cent – from 750p at the start of the week to 900p, and it held its price, closing the week at 894p. On the other hand Informa’s price dropped by 8.5 per cent before briefly rallying and closing the week 6.4 per cent down. Both prices seem to have settled around this level as investors wait for more information.
Some analysts say Informa shareholders were unhappy at the 30 per cent premium but, given that part of the deal was to be funded in Informa shares, the drop in share price has reduced the premium a little. UBM shareholders were also grumbling despite the premium. There is only a 15 per cent crossover in shareholders and many UBM shareholders don’t want Informa shares otherwise they would already be holding them.
Analysts have calculated that the deal value represented a 14x multiple of UBM’s 2018 prospective EBITDA before the Informa price drop but it is now at 13x. In my article elsewhere in this month’s edition I talk about how Private Equity firms have been pushing up multiples, and the high premium to UBM’s share price is presumably to discourage PE from mounting a counter-bid (although several PE firms have been running the numbers since the announcement.) It will be more difficult for PE to justify an increase in the current offer due to the lack of synergies available to them (it has been suggested that £50m of cost savings have to be found in the current transaction) but we can’t rule anything out at this stage.
It will be a while before this all shakes down. The companies have until 13 February to formalise the offer and, it if proceeds, full shareholder approval is required which will involve investor roadshows. If the deal proceeds it will be because the fit of the two companies broadly works – Informa are underweight in Asia, UBM in the Middle East – but if it falls over (and there is a lot of press speculation that it may do so) it will be because shareholders don’t like the metrics of the deal.
Read more about the UBM/Informa merger on EW, here.