UBM holds talks with Informa on £3bn merger

United Business Media and Informa are holding preliminary talks over a merger that could create a global business-to-business media group worth £3.1bn. Both companies confirmed the negotiations yesterday but said there "was no certainty any transaction will take place."

The talks follow an approach made by David Levin, the chief executive of UBM, to Peter Rigby, Informa's executive chairman. The two men know each other well and believe the companies could be an excellent fit, with their existing businesses dovetailing well both strategically and geographically. A combined group would be a FTSE 100 listed company.

It is likely that Mr Levin would be appointed chief executive of the enlarged business, with Mr Rigby retaining his current job title of executive chairman at the new group. UBM and Informa said they were talking about "the commercial merits of an all-share merger," although there has as yet been little discussion about how exactly the finances of a deal would be structured.

Informa has been considered vulnerable to bid approaches for several months, with its share price depressed by concerns about its £1.1bn of debt. The company, valued at £1.6bn, has borrowed heavily to fund a string of acquisitions, including conference organiser IIR, science publisher Taylor & Francis and, most recently, Datamonitor, the market research firm, though all three businesses are performing strongly.

UBM has also been acquisitive in recent years, though it has until now focused on smaller deals. It is best-known for publishing business titles such as Property Week, as well as running one of the world's largest exhibitions units. Informa, meanwhile, publishes Lloyd's List, the shipping industry title, and a number of market research and business data operations.

Both companies earn substantial revenues from their international operations, though mainly in different parts of the world, strengthening the rationale for a merger. However, statements from the two companies yesterday stressed that the talks were at a very early stage and analysts said news of merger talks could smoke out rival bidders for Informa.

One media analyst said the most obvious gatecrasher at the party would be the private equity group Apax Partners, which already has significant interests in the business-to-business media sector, having bought Emap's trade publishing operation and Incisive Media. Apax has also recently appointed David Gilbertson, who had been Informa's chief executive until moving to a new role running the Emap business.

"Apax is a possibility, but it does have its hands very full bedding down these acquisitions," said the analyst. "Another contender could be [the German media group] Axel Springer, which has previously had a bid for Informa rejected."

Other private equity concerns may also express an interest in Informa, though the company's price tag would require a buyer to raise substantial sums in the debt markets.

For this reason, the two companies believe they have identified a window of opportunity for a deal, though one potential sticking point in the negotiations could be the premium Informa shareholders would expect to be paid. "David Levin is not known for over-paying for acquisitions, to say the least," one analyst said.