The nonbinding offer followed weeks of due diligence by the consortium, whose members are: Alpinvest partners, Blackstone group, Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts & Co., Permira and Thomas H. Lee partners.
VNU, whose assets include Nielsen Media Research, ACNielsen, Billboard, The Hollywood Reporter and National Jeweler, said that while the current offer is on the table it is “not continuing discussions with any other party” and would provide more information within three or four weeks.
The bid came nearly two months after VNU scrapped its effort to acquire health care industry research company IMS Health for $7 billion. VNU became a takeover target after the proposed deal led to a shareholder revolt that eventually cost VNU CEO Ron van den Bergh his job.
Shareholders, who said they would not approve the IMS Health acquisition under any circumstances, considered the deal too expensive and not in line with VNU’s strategic direction. As part of the reorganization plan, VNU said it would return $1.17 billion to shareholders in the form of buybacks and dividends.
At the time of the IMS deal collapsed, industry observers speculated that VNU would, rather than sell out, opt for a different course of action under a new CEO. While that scenario cannot be ruled out, an outright sale now seems more likely because of the latest development. On the other hand, VNU has been wooed by suitors before and ultimately rejected the bids.
The bid is worth 28 to 28.50 euros ($34.01 to $34.62) a share, which analysts said was a pretty small premium. However, by banding together and spreading the risk, the consortium may have preemptively squashed other potential bids, said Bob Crosland, managing director at media investment bank AdMedia Partners. “It’ll be difficult to round up another group,” he said.
Still, Crosland added, the opening salvo from the consortium could lead to a bidding war. The consortium is “like the all-stars and has a lot of horsepower, but that doesn’t mean other guys wouldn’t be interested in looking at this property,” he said.
Indeed, other major private equity firms, such as Bain Capital, Texas Pacific Group and Warburg Pincus, have also been taking a look at VNU, according to The Wall Street Journal.
If VNU does get a new owner, “they’ll be looking at individual parts to be worth more than the sum,” Crosland said. “They could take part of it public and spin off other pieces.”
Regardless of what shakes out, the initial bid for VNU is already having an impact on the company. Standard & Poor's Ratings Services said Tuesday it lowered its long-term and short-term corporate credit ratings on VNU by one notch to 'BBB-' and 'A-3', respectively. All ratings remain on CreditWatch with negative implications, where they were originally placed on Oct. 12, 2005. S&P said a sale, or other scenarios such as going public, “would result in a potentially dramatic weakening of the group's credit quality.”
In another development, VNU said Tuesday it would acquire a majority stake in privately owned BuzzMetrics to enhance its media research capabilities. No price was disclosed but VNU said it expected to complete the purchase within 30 days.
In early morning trading Tuesday in Amsterdam, VNU’s stock price was hovering around $34 a share.