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Tuesday, August 19, 2008

RBI First Round BIds Received

The Wall Street Journal reports that first round bids are in for RBI with most at or around the speculated price of £1.2b.

This doesn't mean much. In first rounds you always bid enough to get into the second round (what would be the point of making a non binding indicative offer at a level you know to be unacceptable to the seller?), and that was always £1.2b, and then bidders can see more detailed information and come to a more intelligent view ahead of the second round.

Reed has provided bidders with vendor due diligence as part of the plan to get the deal done fast (before trading starts to be materially affected by the downturn they must hope). Reed will be very keen to complete. One interested party suggested that as the negotiation progressed Reed could be prepared to soften the deal by leaving some equity in the mix. This will help any private equity bid that is strugggling, not with the price, but rather with the mechanics of putting this level of finance together.

So what will happen next. Second round bidders will review the more detailed information, will review latest trading, consider the acceptability of the vendor due diligence and then put in their second round bids or withdraw. I have no way of seeing the information, but you would have to be an optimist not to expect some evidence of trading weakness materialising since the Information Memorandum was prepared. It would be very surprising indeed if the final price reached £1.2b.

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