The latest moves towards a UBM/Informa merger have met with some doubts in the City of London and among industry experts that a deal will be struck any time soon.
“A merger of the two event organiser giants has been the subject of speculation in the City for much of the last decade,” former UFI (the global association for the exhibition industry) managing director and industry consultant Paul Woodward tells CMW, “with lots of analysts keen to see some consolidation in the very fragmented events industry. The two companies would actually be a pretty good fit with relatively few major overlaps in their exhibitions businesses.
“UBM has no activity to speak of in the Middle East, one of Informa’s strongholds, while its Asia business is the strongest in the industry and would substantially beef up Informa’s position there. Both have made big investments in the US and the two together would be real powerhouse in the world’s biggest market. I’d say that, given the reaction of the companies’ respective share prices since the leak and subsequent announcement on Tuesday [15 January], the maths of the offer doesn’t really seem to add up all that well any more. So, there’s going to be pressure on Informa to improve it which would make it look pretty expensive. So, it’s far from a done deal and we probably won’t really know where we stand with it until very close to that 13 February deadline.”
Shares in Informa initially dropped 8% on 17 January, the day after a statement was released by UBM’s group company secretary Mark Peters announcing that two of the world’s largest events organisers, UBM and Informa, were in merger discussions.
A large proportion of the share price fall was due to arbitrage funds rather than institutional investors selling down their stakes and the share price recovered to end the day 5.5% down.
It is understood Informa had made a £3.8bn ($US5.29bn) offer in cash and shares for UBM to create a merged operation worth £9bn (US$12.53bn). Under the proposed equity deal Informa shareholders could end up with two-thirds of the new enterprise.
A UBM statement, 16 January, confirmed the Informa approach: “Further to the recent UBM share price movement, the Boards of UBM and Informa confirm that they are in discussions regarding a potential combination of the two companies, to be effected by way of an acquisition of the entire issued and to be issued share capital of UBM by Informa for shares and cash consideration (the “Potential Combination”).
“UBM and Informa are in preliminary discussions about the details of the Potential Combination, which is subject to a number of standard conditions.
“There can be no certainty that any firm offer will be made or as to the terms on which any offer might be made. Informa reserves the right to introduce other forms of consideration and/or vary the mix or composition of consideration of any offer. Shareholders will be kept updated as appropriate.
“In accordance with Rule 2.6(a) of the Code, Informa will have until 5.00pm on 13 February 2018, being 28 days after today’s date, to either announce a firm intention to make an offer for UBM in accordance with Rule 2.7 of the Code or announce that it does not intend to make such an offer, in which case the announcement will be treated as a statement to which Rule 2.8 of the Code applies. This deadline may be extended with the consent of the Takeover Panel in accordance with Rule 2.6(c) of the Code.”
UBM is the largest pure-play B2B events organiser in the world with a portfolio of 300 events, while Informa has more than 7,500 colleagues globally, with a presence in North America, South America, Asia, Europe, the Middle East and Africa. The combined company would have more than 10,000 employees around the world, but analysts are predicting hundreds of jobs will go, including UBM chief executive Tim Cobbold’s. It has been reported that Cobbold received payment of £3.4m last year, including a £1.7m bonus.
Informa chief executive Lord Carter of Barnes said: “We are proposing the creation of a B2B Information Services Group, which will be ideally positioned to serve a market demanding ever greater Operating Scale and Industry Specialisation. The Combined Group will have the international reach, operational capabilities and cashflow to pursue the full growth opportunities this creates.”
The two companies first explored a merger 10 years ago, and the renewed attempt at merger appears to be driven by a need to build greater scale across conventions.
Lord Carter is tipped to lead the new merged company. He added: “The business-to-business market is moving to operating scale and industry specialisation. The combined group will have the market capabilities to take full advantage of these trends.”
Under City of London takeover rules Informa has until 5pm on 13 February to make a formal offer. However, subject to the ongoing discussions, the boards of Informa and UBM have said they expect to recommend the proposed combination to their respective shareholders. The likelihood of another bidder entering into the process is unlikely given that it would have to be a hostile approach.