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Thursday, December 11, 2008

What will Reed do With RBI Now?

So that's it then. Reed Elsevier has "postponed" the sale of RBI for the "medium term". Since the disposal was announced last February the credit market has collapsed and so has the b2b media trading environment.

There has been no meaningful trade interest in RBI for months and now private equity buyers have proven to be very thin on the ground. The only deal on the table involved a deferred consideration and a low price. This would have left Reed exposed to a risk of not achieving even the depressed price the media has speculated. They wanted the cash from the sale to protect their credit rating and to pay down debt incurred following the acquisition of Choicepoint.

Reed will be kicking themselves that they did not get on with this disposal two years ago.

As the City digests the implications of this (even good international business media businesses are unsellable at almost any price) expect the pure play b2b public companies to endure a further beating on their share price.

What next for RBI? Clearly there is room for some substantial cost cutting. They should also be closing titles, downsizing the scale of the business and its overheads, re thinking how their magazine model works and run the place as if it were owned by private equity.

This will be very counter culture RBI management. They should plan that they have to exit their current shareholder in three years - just like a private equity manager would think. Exposing palpable shareholder value in such a short time period is not the same strategic approach as running a business as part of a long term position in a large corporate group.

The changes in thinking required are so fundamental that it would be wise to makes some management changes and to make them fast.

If I were Keith Jones (and for the record I am not), I would want to get such a plan written and in place before Ian Smith, the new Reed Elsevier CEO turns up. If I hadn't, I might expect a short career as global RBI CEO.


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