Emap shares dive after it shelves plans to sell its business titles

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The Independent Online

Emap, the media group yesterday confirmed the sale of its consumer magazine and radio businesses to the German publisher Heinrich Bauer, but disappointed investors by with the news that it is to retain its business-to-business division.

Emap is understood to have been unhappy with the value of bids for its B2B publishing division, which was expected to be snapped up by Apax, the private equity group, or the Guardian Media Group. The company had been holding out for a price of 1.3bn for this part of its operation, but was not able to generate such value.

The failure, which surprised many, depressed the company's share price by 77.5p to 747.5p last night.

Emap said it had now terminated all discussions with interested parties on the unit and that it planned to transform itself into a "focused B2B business".

The division will continue to operate as a listed entity, which is expected to be worth about 1bn once the sale of the consumer and radio businesses is completed.

Bauer said it had agreed to pay 1.14bn in cash for the magazine unit, which includes popular titles such as Grazia, Heat and FHM, and the radio business, which includes Magic FM, Kiss 100 and Kerrang!, beating market expectations of about 1.2bn. Emap said it intended to return about 1bn of the proceeds to shareholders.

The company also announced that Derek Carter, the chief executive of the business-to-business division, will assume the role of group chief executive of Emap, while Ian Griffiths, the group finance director, will take on additional responsibility as his deputy.

The executive chairman Alun Cathcart said the company was pleased with the outcome of the structural review which had triggered the sale process. "We are pleased to have achieved a successful outcome in the review of Emap's group structure. The price achieved for Emap consumer media and Emap radio fully reflects the value of the two divisions," he said. "Emap will now be a focused business-to-business company."

Richard Wheatly, chairman of The Local Radio Company, another radio operator, welcomed the sale, noting that the premium price offered by Bauer would help set the bar for future merger and acquisition activity in the radio business.

"The price Bauer has paid is a fair one and represents a benchmark for further deals in the consolidation of the UK radio sector," he said.

Analysts at Lehman Brothers said the fact the company was unable to sell the business-to-business division was bad news for the sector, since other businesses were valued more highly, suggesting a disparity between expectations and the actual price achievable on a sale. The investment bank added that it believed the negative reaction on the market had been overdone.

Emap Communications publishes professional publications and organises trade exhibitions, conferences and festivals including the Cannes Lions international advertising festival, the creative industry's annual awards bash.

The division, which owns DeHavilland, a leading political information service, is focused on the construction, media, automotive, public sector and healthcare industry.