In a dramatic U-turn, the board of Emap yesterday agreed to sell its business-to-business publishing unit to Guardian Media Group and the buyout giant Apax Partners for 1bn, at least 300m less than it had been expected to fetch.
The move comes just two weeks after the company saw its shares plummet after it sold its radio and consumer magazine units to Heinrich Bauer, the family-owned German publisher, for 1.1bn, but decided to keep the business publishing group. The latter was the group's most valuable asset and was widely expected by analysts to fetch up to 1.3bn.
The Emap executive chairman, Alun Cathcart, said that the offers received two week ago "weren't good enough" and that the board was unanimous in its decision to retain the business. Its shares dropped nearly 10 per cent on 7 December, when the company revealed its decision. Mr Cathcart said yesterday it was Apax and GMG that reopened talks and that the bidders' new offer was "significantly improved." Emap shares climbed 21.8 per cent to 925p.
Combined with the 1.1bn that Bauer has agreed to pay for the businesses which publish Heat and Grazia and which own Kiss FM radio, the sale will mean a total cash payout of 931p per share for Emap investors.
Charles Peacock, an analyst at Seymour Pierce, had envisioned a break-up value of just over 10 per share when the company first revealed plans for a strategic review in July. However, he said that, given the meltdown in the credit markets in the intervening months as well as a 40m pension payment which the company made last month, the valuation was healthy and likely to have little trouble gaining shareholder approval.
"Their tactic to leave the [business-to-business unit] in the plc demonstrated that they had a credible alternative, and that surely focused the minds of Apax and Guardian," he said.
Yet Mr Cathcart's version of the events leading to the sale clashes with that presented by another source involved in the process, who said the board felt compelled to sell after shareholders expressed their disappointment at the decision to keep the business publishing unit. The source said: "They were shocked by the response they got when they failed to sell it and were keen to prove to the market that they could do something with it."Reuse content