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January 11, 2013 4:12 pm
Mecom, the struggling European newspaper publisher, revealed it had begun talks to sell its Dutch, Danish and Polish operations as it reported a 9 per cent decline in full-year revenues.
The London-listed company, which owns more than 250 printed titles and about 200 websites, last year launched a strategic review to look at “all options”, including a break-up of the business.
In a trading update on Friday, Mecom said it had received no “acceptable” offers for the whole of its operations in the Netherlands, its biggest division. But Mecom said it had received several offers for individual parts of the Dutch unit and would consider them.
“The key point is that they probably won’t be able to sell the Dutch business as a single business,” said Patrick Yau, media analyst at Peel Hunt, who reduced his estimate of the group’s valuation following the announcement.
“We still view this as a break-up story and there’s a lot of value to be unlocked,” he added.
Print media companies like Mecom have for years been suffering from a long-term decline in circulation and advertising revenues. Investors have shunned the sector as a result, causing valuations to fall sharply.
Mecom said on Friday that total advertising revenue fell 17 per cent in 2012. The group forecast that full-year earnings before interest, tax, depreciation and amortisation would be €89m, in line with previous guidance.
Year-end net debt was €130m, representing about 1.5 times ebitda.
Mecom also revealed on Friday that it had received a number of offers for its Polish division and was now in exclusive discussions with one party. It has also received expressions of interest for its entire Danish operations and would soon invite a small number of potential buyers to conduct due diligence.
Taking confidence from Mecom’s progress towards asset sales, investors sent its shares up 8 per cent to 88p by mid-afternoon on Friday.
Mr Yau of Peel Hunt estimates that the shares could be worth as much as £1.50 if Mecom sold all of its businesses and returned the cash to shareholders. Mr Yau’s estimate is based on an assumption that Mecom would sell for an enterprise value of 4.75 times its ebitda, a multiple that is towards the low end of valuations in European newspaper deals over the past few years.
Mecom said it would provide an update on its strategic review when it releases its annual results on March 21. The company added that it expected to propose a final dividend in line with its policy of dividends being approximately three times covered by net adjusted earnings.
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