Cinven kicked off 1998 in fine style, exchanging contracts for the GBP860 million (ecu 1.3 billion) buyout of the IPC magazine group from Reed Elsevier during the first week of January, following intensive – and exclusive – negotiations during the Christmas and New Year period.
The price Cinven paid was towards the upper end of IPC’s expected value when Reed Elsevier put the UK’s market-leading consumer magazine publisher up for sale. Disposal to a financial purchaser was always on the cards: Reed Elsevier was looking for a quick, clean sale with no danger of interference from the monopolies regulators in view of its proposed merger with Wolters Kluwer of the Netherlands later this Spring.
Following Cinven’s initial offer, Reed Elsevier granted the private equity house exclusive negotiating rights over a dozen rival trade and financial bidders. One of the competing private equity contenders, Electra Fleming, was reportedly chagrined that a second round of bidding posited by SBC Warburg Dillon Read, advisors to the vendor, failed to materialise. Apparently, however, a second round would have been instigated only had Cinven failed to tie up the deal by the 5 January deadline.
Although the IPC buyout completed at a time when business news is relatively thin on the ground, the level of coverage the UK press gave the transaction also reflected the infrequency with which magazine portfolios of such a size arrive on the blocks. The UK consumer magazine market is currently an attractive sector, worth GBP1.5 billion per annum and characterised by a high level of launch activity which has increased total magazine sales over the past six years.
IPC publishes 69 regular frequency consumer magazine titles in the UK and a further three in Australia, covering a range of 26 mass and niche market sectors including “traditional” women’s weekly and home interest titles, TV, general interest, health and beauty, gardening, both mainstream and more specialist sports and hobbies, and the currently vogueish “men’s lifestyle” arena. This portfolio generated operating profits of GBP63 million on revenues of GBP314 million in the year ended December 1996. The group, which is highly cash generative, has seen strong growth in recent years, a trend which is expected to continue.
Future growth, prior to an intended flotation, will be achieved by exploiting the strength of existing brands, launching new titles “at a more rapid rate than hitherto” and through acquisition, Cinven director Dick Munton said.
Cinven co-lead equity managers brought in PAI-Paribas Principal Investments, ABN AMRO Corporate Investments and Greenwich Street Capital Partners. Cinven has invested in the past with both PAI-Paribas, its partner in last year’s Elis and Generale de Sante deals, and ABN AMRO. Greenwich Street Capital Partners, an affiliate of Travellers Group, came in following an introduction from its Travellers stablemate Salomon Smith Barney, which advised Cinven on the IPC deal. Full structuring details remain confidential, but Dick Munton confirmed that Cinven holds an overall majority of both the ordinary and preferred equity.
Goldman Sachs provided debt facilities totalling GBP580 million. This package includes a GBP180 million mezzanine bridge facility which will be refinanced through a high-yield issue in due course.