PUBLISHED: 9.38am 30/01/18 UPDATED: 9.09am 31/01/18
Global event organiser and information company Informa has outlined the rationale behind its £3.9bn offer for UBM, the largest pure-play B2B events organiser in the world, and says the offer has now been recommended by the Boards of both companies.
An Informa statement forecast annual synergies and growth opportunities.
The enlarged group will span Business Intelligence, Academic Publishing, Exhibitions and Conferences, and will serve business customers in more than 30 countries. It will be the world’s number one B2B events operator, owning and operating major branded events serving 15 different industries from technology and pharma to beauty, fashion and yachting.
• Other key points from the press statement from the companies included:
• Predicted operating synergies, including at least £60m of annual recurring pre-tax cost savings, with around £50m to be delivered in the 2019 financial year.
• Positive earnings enhancement in the first full financial year based on Informa’s adjusted earnings per share.
• Post-tax ROIC (return on invested capital) in excess of Informa’s WACC (weighted average cost of capital) within 3 full financial years of ownership.
• More than two-thirds of the enlarged group’s revenue will be forward booked and predictable, being generated from exhibitions, subscriptions and pre-booked sponsorship.
• £600m of annual free cash flow (on a pro forma basis for 2016).
• Attractive incremental near-term revenue synergy opportunities (not quantified for the purposes of reporting under the Takeover Code).
The Board of Informa added that it intends to maintain a ‘progressive’ dividend policy.
The enlarged group will have pro-forma revenues of around £2.6bn and adjusted operating profit of around £800m.
Informa believes that the enlarged group will not only become the number one B2B events group globally, but will own 24 of the top 250 US exhibitions.
More than 150 of the global brands under the new enlarged group generate more than £2m a year, while more than 60 of the brands generate in excess of £5m a year.
The Enlarged Group will employ around 11,000 staff. Analysts are predicting job losses, although chief executive of Informa, Stephen Carter’s estimate that they would be in the low hundreds could be wide of the mark if the £60m figure for savings is to be met.
The UBM chief executive and chief financial officer will have their departures cushioned somewhat, to the tune of £11.3m according to the Daily Telegraph, following the Informa takeover.
The newspaper says Tim Cobbold and Marina Wyatt both own hundreds of thousands of shares in UBM that they will be able to cash in once the deal is completed and they make their exit.
Regulatory documents showed CEO Cobbold, appointed in 2014, is in line to receive more than £6.7m, while CFO Wyatt, who joined UBM in 2015, owns shares worth at least £4.5m.
The Telegraph added that Informa had confirmed that both will leave once it takes control, although Mr Cobbold will be paid as an adviser until the end of the year.
The companies believe they have a “highly complementary geographic fit”, with positions in the major markets of the United States, China, Middle East, ASEAN, South America and India.
Commenting on the 30 January 2018 announcement, Carter, said: “It is clear that the B2B market is moving to operating scale and industry specialisation. Our recommended offer for UBM promises to create a leading B2B information services group with the international reach and market capabilities to take full advantage of these trends.
“The enlarged group has the potential to deliver strong growth and significant value for shareholders. We will seek to operate with speed and purpose through an Accelerated Integration Plan that unifies management, combines our businesses and adopts a focused approach to industry specialisation. This will ensure the enlarged group enters 2019 as a single business, with positive growth momentum and well-placed to deliver at least £60m of annual recurring operating synergies.”
Carter added that the deal represented “a compelling offer”, adding that it was “the right moment to join forces, enabling the enlarged group to capture more fully the international growth opportunities in B2B information services, while providing benefits for customers and colleagues in the markets that we serve around the world.”
“We will implement an Accelerated Integration Plan that will establish the enlarged group swiftly and smoothly, helping to secure significant operating synergies, to seize incremental growth opportunities and to deliver significant value for shareholders,” Carter added.
Chief executive of UBM, Tim Cobbold, added: “Over the last three years, Events First has focused UBM on the attractive events market and the team at UBM has built a high-quality events business with geographic breadth and strong brands, serving diverse industry sectors. The enlarged group will build on this platform becoming a leading events group globally, with the capacity to accelerate investment in data and technology to drive long term growth both in events and more widely in the Information Services sector. The terms of the offer recognise the quality of our business and the strength of our future prospects, providing shareholders with attractive value as well as allowing them to participate in the future growth opportunities provided by the enlarged group.”
UBM plc has also issued a trading update for the year ended 31 December 2017 in which it said trading in the fourth quarter has been ahead of company expectations, with particularly good performances at the CPhI events, Cosmoprof and Food Ingredients.
“Given the strength of this recent performance, UBM now expects to deliver adjusted underlying annual events revenue growth of at least 5% (with corresponding underlying revenue growth of approximately 3.5%). This, coupled with an OMS performance in line with UBM’s expectations, will result in reported total group revenues of approximately £1,000m for the year ended 31 December 2017.
“As a result of the strong performance, in what is a biennial up-year, the board of UBM expects the UBM Group adjusted operating profit margin to be approximately 29% and consequently the full year outturn to be ahead of expectations.”
UBM promised a final dividend of 18.0 pence per share. This would result in total dividends per share for the 2017 financial year of 23.5p, a year-on-year increase of 6.8%.
To coincide with Informa, UBM now intends to release its 2017 Full Year Results on 28 February 2018.
UBM also announced that with immediate effect, Greg Lock, currently acting chairman, has been appointed non-executive chairman and Warren Finegold, non-executive director, becomes senior independent director and chairman of the Remuneration Committee.
The deal, however, will likely mean the end of the UBM name, which traces its heritage to the United Newspapers publishing company set up by David Lloyd George in 1918.