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Monday, July 21, 2008

RBI Sale Attracts 20 BIds

The Telegraph and others report on the late start to the auction of RBI. The Telegraph suggests that perhaps 20 copies of the Information Memorandum have been sent out. The late start is partly due to the Reed management needing time to put together the debt finance necessary to keep private equity feet warm in an icy credit crunch. Around £160m of the £750m staple finance is Reeds own money, underlying their enthusiasm to get this done.

Reed is also determined to avoid a break up sale. It is understood that part of the delay was to enable a rewrite of the IM so that it was not possible for buyers to dissemble the parts and arrive at a break up valuation.

If true, this may turn out to be tactical mistake. If the sale to a single party is completed, there are few if any buyers who will not want to dispose of a good chunk of assets either because they don't have a strategic fit, or in the case of private equity, to push down the debt burden a little.

The Telegraph says bids are due mid August. Second round bids I would guess will be mid September and if there is a credible winner, there will be around eight weeks of due diligence, which implies the earliest date for completion will be Mid November.

Reed had better hope that revenues hold up against forecast during the next three months. The slightest wobble will lead to price chipping.

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