Parent remains silent about planned Reed Business sale

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Reed Elsevier division reportedly drawing interest, but few facts known about potential suitors, deal Reed Elsevier has been mum on its efforts to sell its Reed Business division, and the amount of information released to the public since the company announced its plans in February has been minimal. But industry watchers have plenty of thoughts to share on the divesture of today's largest b-to-b media company. “Reed Business is arousing a lot of interest,” said Reed Phillips, managing partner of media investment bank Desilva+Phillips. “But buyers won't really know where they are on pricing until they have to make a final offer. Not only is it a big company, but it's also a complex transaction because it operates in different regions of the world.” In addition to its diverse portfolio of well-known brands—such as BuyerZone, EDN, Interior Design, JCK (Jewelers' Circular Keystone), Kellysearch, Publisher's Weekly, Reed Construction Data and Variety—Reed Business has many other attractive qualities, Phillips said. “It has been moving aggressively from print to electronic media. It has geographic diversification. And it's large, which is important to many financial buyers.” There is also a strong possibility that Reed Business may be split. “Some groups are bidding together. There could be one transaction with two buyers dividing up the assets,” Phillips said. “If you look at the composition of the company, it doesn't appear likely that anyone who gets the whole kit and caboodle will keep the whole kit and caboodle,” said Michael Parker, managing director of AdMedia Partners. “The most likely scenario is that the company would be divided up by verticals rather than geographically.” Parker said the wild card will be financing. Reed Elsevier is reportedly offering a loan of $330 million and has lined up banks to fund about $1 billion more of an estimated price of at least $1.8 billion. “In the tight credit market we have, this is an enticing option,” he said. In spite of Reed Elsevier's efforts to keep the process quiet, the media have been able to unearth some details. The Financial Times this month published an interview with Hartmut Ostrowski, chief executive of Bertelsmann, parent of Gruner+Jahr, one of the few companies to confirm its interest in bidding on Reed. Ostrowski injected a note of uncertainty by telling FT, “Whether we'll even make a binding offer isn't clear at the moment. We're not under pressure.” Late last month, The Observer reported that U.S. private equity group Apollo Management had entered the bidding for Reed, making it the eighth private equity firm reported to be in the competition. Reuters, citing “separate sources,” has been running a list of potential financial buyers that includes Advent International, Bain Capital, Candover, Cinven, Providence Equity Partners, Quadrangle Group and TPG Capital. Aside from Gruner+Jahr, McGraw-Hill Cos. is the other strategic buyer mentioned as a bidder by Reuters and others. In its Aug. 21 Financial News Private Equity News, Dow Jones published an exclusive based on an internal document. The report said, in part, that “the global board of Reed Business will give a management presentation to potential acquirers” during the first three weeks of September. Those presentations would follow a first round of bidding and a reported “rebid.” London's Daily Telegraph reported in mid-August that up to 12 bidders submitted first-round offers valued between $1.9 billion and $2.3 billion. Reuters, citing sources, reported on Aug. 25 that Reed Elsevier was allowing “rebids, not officially a second round ... because bidders felt they were not provided enough information on the business in the first round.” Reed Elsevier has said it expects to complete the transaction before the end of the year. M
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