Despite the apparent burst of activity, few expect leveraged buyouts in the sector to be a particularly easy sell as recent deals from Endemol and Emap attest.
Certainly, if the buyout facility for Endemol is any indicator of how media names might fare in the market, the going could be hard. The €2.2bn loan backing Mediaset‘s purchase of a 75% stake in Endemol was relaunched in June this year at 72.50% of its face value, though it was also sold at 70% to those with cash on hand and at 75% to those requiring financing.
Potential for mishaps are not limited to legacy names like Endemol, which was underwritten at the height of last year’s credit boom. According to market talk the debt supporting
- Apax and GMG‘s buyout of Emap also found life hard in syndication.
The deal was first underwritten in December and not launched until March. Initially it was intended to merge the business with Apax’s other media assets, though this has been delayed until debt market conditions improve.
Bankers said Emap’s performance was reflective of a market that despite having reasonable liquidity for the right name and structure remained exceptionally nervous.
Even with these difficulties bankers are still willing to supporting deals in the sector. The loan of about £1.7bn backing the potential buyout of UK publishing group Informa by a private equity consortium composed of Providence Equity Partners, Carlyle and Hellman & Friedman is believed to be in the process of being mandated, with JPMorgan and ING rumoured to be leading the charge.
Informa’s business mix suggests it may be a good candidate for a buyout. It has business publishing activities that are considered both resistant to Internet encroachment, because they are largely subscription-based, and anticyclical – as they focus on non-consumer, professional, segments. Publishing accounted for revenues of some £495m, or about 44% of the total in 2007. Around 36% of its revenues were generated by its events division.
How keen the market is to cosy up to businesses that rely on advertising revenue will be gauged by the outcome of the sale of Reed Elsevier’s Business Information division. Rumours suggest that the parent company will support the sale of its advertising-led business publishing arm with staple financing.
There is also talk that, in a market where liquidity is tight, banks would prefer to support the Informa buyout. However, given that JPMorgan is also said to be leading the financing on the Reed deal – and that leverage is reported to be no more than three times Ebitda, this may be wide of the mark.