Johnston acquires Emap titles for pounds 111m
Wednesday 05 June 1996
Robin Miller, Emap's chief executive, said: "It's clearly a momentous day for Emap. We were founded on local newspapers back in 1953 as East Midland Allied Press. But spending pounds 500m in the last couple of years has caused us to think where our priorities lie."
Johnston, which fought off competition from rivals including Midland Independent Newspapers, is funding the deal with a one-for-two rights issue at 169p, raising pounds 11m. Buying Emap's regional titles increases Johnston's position in the UK regional newspaper market from 11th to fifth. In the year to March, the Emap titles made on-going operating profits of pounds 13.1m on $100m sales.Shares in Johnston rose 4p to 210p, though Emap fell from near an all-time high to close 27p lower at 675p.
Although the deal more than halves Emap's borrowings to pounds 150m, Mr Miller insisted getting the balance sheet back in shape was not the main reason for selling the regional newspaper business. "There are better and different things for us to spend our money on."
Emap has expanded rapidly into radio, specialist consumer and business magazines and the exhibitions market. This year, it paid pounds 142m for the French magazine interests of media giant CLT, which include the Tele-Star television listings guide with a circulation of 2 million. The company is keen to boost subscription revenue, currently 46 per cent of turnover, by expanding its fledgling electronic publishing activities. Further expansion in the US business information market is also on the cards.
News of the deal came as Emap announced a 35 per cent increase in pre- tax profits to pounds 86.5m on sales 29 per cent higher at pounds 705m for the year to March. The profit figure excluded an pounds 8.2m charge taken to restructure business acquired during the year. Radio was the strongest performer with operating profits up 178 per cent at pounds 14.6m, helped by contributions from recent acquisitions of TransWorld Communications and Metro Radio.
The drop in Emap's share price surprised analysts, who argued it had sold out on very good terms. "It's right at the top end," said Mike Hilton at Kleinwort Benson. "To get pounds 211m for a slow-moving newspaper business making pounds 11m is a pretty good price."
Emap argued the deal would be earnings-neutral but Mr Hilton disagreed, saying the high exit multiple of 30 times post-tax earnings meant his pre-tax forecast for the year to March 1997 would be raised from pounds 102m to pounds 110m.
The deal marks the latest stage in a period of rapid consolidation in the market. The departure of big media players like Emap and Reed and Thompson leaves Pearson's Westminster Press as one of the few regional chains still owned by a large publisher.
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