Emap sells magazines, radio, but disappoints on B2B

LONDON (Reuters) - Emap EMA.L has agreed to sell its consumer magazines and radio businesses to German publisher Bauer for 1.14 billion pounds ($2.3 billion), but dropped plans to sell its business-to-business unit, hitting its shares.

The cover of a May 2006 issue of Emap's First magazine. Media group Emap has agreed to sell its consumer magazine and radio assets to German publisher Bauer for 1.14 billion pounds. REUTERS/Handout

Analysts had expected Emap to raise around 1.2 billion pounds from selling Emap Communications, its business-to-business (B2B) unit which publishes trade magazines and is Britain’s biggest organizer of trade exhibitions.

A spokesman for the Bauer business said the deal marked a “big step” in terms of boosting group revenues.

“The Bauer publishing house has been focused on international expansion as the German market has become more difficult,” he said.

At 0554 EST, Emap shares were down 7.8 percent at 761 pence, having fallen almost 10 percent in early trading.

“The termination of the auction of the B2B assets removes the potential for a premium multiple paid on these assets,” Goldman Sachs analysts wrote in a research note.

UBS analysts, however, said Emap had got a good price for its consumer magazines and radio stations, which include FHM and Magic respectively, and that it was keeping its best business.

“Whilst there may be some initial concerns that they have not crystallized the value for the B2B, we believe that this is Emap’s best asset,” they wrote in a research note.

Emap said it would return around 1 billion pounds -- or about 460 pence a share -- to shareholders following completion of the deal with Bauer.

The overall price was based on 718 million pounds payable in cash for Emap consumer media and 422 million for Emap radio.

Emap Finance Director Ian Griffiths, who becomes deputy CEO within the leaner business, said bids for the business-to-business division were just not high enough, but would not be drawn on how far short of expectations they fell.

“If we are going to sell it or dispose of it there needs to be a premium to reflect change of control and quality and that was not reflected in the price,” he told analysts in a conference call.

Sources close to the matter told Reuters on Thursday Bauer was in exclusive talks to buy Emap’s consumer magazines and radio businesses, which analysts had expected to fetch around 700 million and 400 million pounds respectively.

“Emap assessed all options for Emap Communications, including a possible disposal,” the firm said in a statement.

“However, the board believes that the best value for shareholders will be achieved through continuing to operate this focused business on a standalone basis and accordingly, the board has terminated all discussions with parties interested in Emap Communications.”


Emap has long been tipped as a break-up target, following a string of profit warnings as it struggles with competition from the Internet and a weak advertising market. The sudden departure of Chief Executive Tom Moloney in May triggered several expressions of interest in its businesses.

Emap said Derek Carter, chief executive of Emap Communications, would become group chief executive after the disposals. Alun Cathcart, currently group executive chairman, will revert to a non-executive role until a new non-executive chairman is found.

The group said trading at Emap Communications had continued to be in line with its expectations since the end of its fiscal first half on September 30 and that prospects for the business were encouraging.

The sale of Emap Radio is conditional on Emap completing the disposal of its Irish radio business. Bauer’s acquisitions also needed to secure competition clearance in Germany and Austria.

Citigroup C.N and Lazard LAZ.N handled the sale.

Additional reporting by Mark Potter in London and Nicola Leske in Frankfurt; Editing by Quentin Bryar and Sue Thomas