VNU shareholders face tough choices

The €7.5bn (US$9bn) public tender offer for Dutch media group VNU by a private equity consortium is facing renewed attacks. At a presentation in London (April 6), Knight Vinke Asset Management (KVAM), the activist fund manager holding a 2% stake in VNU, urged shareholders to reject the tender offer and presented an alternative plan.

KVAM argued that the public cash offer of €28.75 per VNU share effectively amounted to €28.32 after adjusting for the unpaid final dividend. A spokesperson at KVAM explained that over the last two years, VNU paid dividends of €0.55 broken up into an interim dividend of €0.12 and a final dividend of €0.43. KVAM insists that the final dividend should be paid.

The fund manager furthermore proposed a partial tender offer for 30% of VNU, for €28.32 per VNU share after the final dividend. KVAM argued that this would allow investors that wanted to exit to find one and the rest to carry on with the company and reap the benefits. Observers believe KVAM is in favour of a break up of VNU.

The KVAM proposal includes releasing the bidding consortium of private equity firms from their standstill commitments, reconstituting the VNU supervisory board, and hiring new management.

In March, VNU’s board of directors had announced that it backed the public tender offer by Valcon Acquisition, a bid vehicle controlled by a private equity consortium consisting of affiliated funds of AlpInvest Partners, Blackstone Group, Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts and Thomas H Lee Partners.

On April 6, KVAM also announced that Institutional Shareholder Services (ISS), an advisory firm for institutional investors on proxy voting and corporate governance issues, had stated that it had “concerns” with the VNU offer. Apparently, ISS said that as no vote on the offer was to be taken at VNU’s annual general meeting to be held on April 18 2006, it was recommending that shareholders vote against other proposals related to the offer at the meeting.

KVAM explained that ISS recommended that shareholders vote against electing the private equity consortium’s nominees and against the amendments to VNU’s articles facilitating the offer. The statement said that ISS recommended voting against the approval of VNU’s financial statements, which do not provide for the payment of any final dividend, because it believed that a dividend should be paid regardless of the consortium’s offer.

Knight Vinke, along with Fidelity Investments and Templeton Global Advisors Ltd, led the shareholder revolt that culminated in the collapse of a US$6.3bn plan to buy IMS Health, and VNU chief executive officer Rob van den Bergh’s resignation.

Earlier this year, VNU’s CFO Rob Ruijter was quoted as saying that the company had been so damaged by repeated clashes with its biggest shareholders that management might not be able to deliver on its own goals and that the takeover offer was the best option for shareholders.

Alex Wessendorff