Apax/GMG make Incisive bid for Emap

Apax Partners and Guardian Media Group have ended several months of speculation and 60 years of independence for Emap by buying the UK publisher for £2bn. The acquisition, just before Christmas, came as a surprise after advisers Citi and Lazard appeared to call off a third round auction in favour of retaining Emap’s business-to-business division after an under-whelming response to the second round.

Apax and GMG’s 470p per share offer, through their Eden Bidco vehicle and totalling about £1.26bn in transaction value, was for the entire group but is subject to completion of German publisher Heinrich Bauer Verlag’s £1.14bn purchase of Emap’s consumer magazine and radio units. The Apax and GMG offer is therefore subject to receipt of a special dividend from the Bauer acquisition of 461p in cash per Emap share, with Emap shareholders receiving 931p in cash per share.

Bauer’s acquisition in early December was also conditional upon the completion of the sale of Emap’s Republic of Ireland radio group, Communicorp, a €200m transaction announced last June. The sale was approved in early January.

Finance for the Apax and GMG purchase was arranged by a banking syndicate comprising HSBC, GE, Lloyds TSB and RBS. Apax and GMG, advised by Deutsche Bank, are reported to have leveraged the deal on a multiple of 6.5 times Ebitda of about £100m.

In the weekend before Christmas, Apax and GMG moved to deter rival bidders by acquiring a combined 19.4% stake in Emap. No counterbid has, as yet, been forthcoming.

The offer was a substantial premium to Emap’s shares, which closed at 759.5p the day before Apax and GMG made their move. However, the stock has been volatile in the past nine months, hovering around 711p at the beginning of March 2006, gradually increasing to 925p in early October before dropping again to 745p in early December.

News of Apax and GMG’s offer triggered a steep climb of more than 20% to a high of 938.5p before gradually dropping again to about 916p at the time of going to press in early January.

Following completion of the transaction, Apax and GMG intend to merge Emap’s B2B unit, which houses titles such as Broadcast, Drapers and Retail Week, with Incisive Media, whose titles include Investment Week, Risk and Your Mortgage.

Apax Partners acquired business information provider Incisive Media in September 2006 for £199m, with AIM-listed investor Ingenous Media Active Capital purchasing an 11% stake for £22.03m a few months later.