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Monday, July 28, 2008

Wilmington Could get Sold to HG Capital

The Telegraph reports that Wilmington is poised to receive bid interest from private equity firm HG Capital. Other mid market players, such as Centaur, could generate interest too says the Telegraph.



Like all media stocks, Wilmingtons share price has suffered of late, despite turning in profit growth. Wilmington has also reduced its dependency on magazine advertising by selling off mags. There is still much to do though to turn Wilmington into a powerhouse media company. I have no doubt that CEO Charles Brady looks enviously at the privacy enjoyed by APAX owned, Incisive Media as it wrestles with the new paradigm.



This kind of public to private transaction will likely only happen with the support of management. If Brady and his Board want this to happen and a believable plan can be constructed then it will. If Brady is hostile to HGC it won't.



Interestingly Centaur is more of a bargain than Wilmington. About the same size as each other Wilmington trades on a p/e of 16; Centaur trades on half that. Put another way the market value of Wilmington is considered to be 8 times its 2007 profit. Centaur is today valued at just 4 times last years profits. This reflects the work that Centaur has yet to do, and Wilimington has already started, to move the business from magazine dependency to professional information solutions.



Heres a thought. Buy Wilmington and then buy Centaur, strip out all the duplicate costs (perhaps £10m) and replicate the events/training expertise of Wilmington in the Centaur business. Both businesses have useful positions in the legal sector too.



Assuming you share the benefits of the cost saving between the two valuations the implied value of Centaur, based on todays share price is just 2.6 times post merger profits.



So pay a 30% premium on todays price for Wilmington and twice todays price for Centaur and what do you have? A combined business with a turnover of £170m, profit of £47m acquired for a blended price of 7 times earnings.



I am not sayng these are the right prices to bid, but it does illustrate that something is do-able if all the parties are willing.



Oh and one more unconnected thing - a little bird tells me that a big announcement is about to go down tomorrow - Tuesday - at a major b2b media house. My bet is on a swathe of redundancies at.......

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