Move for Informa collapses

The collapse of Project Isobar, the codename for the proposed buy-out of Informa by a private equity consortium, is a profound omen for the future of dealmaking in the media sector, analysts said on Friday.

A 450p a share bid, valuing the company at £1.9bn, was withdrawn after the 12 banks involved in financing the deal were unable to provide the extra money to fund a higher offer.

“The offer could have gone to 454p or 455p, but the [Informa] board said, and they were quite within their rights, that there had to be a materially better offer [than 450p], and that wasn’t going to happen,” a person familiar with the conclusion of the process said.

In July, the consortium of Providence Equity Partners, Carlyle Group and Hellman & Friedman submitted an indicative bid of 506p which, including about £1.3bn of net debt attached to the publisher of Lloyd’s List, valued Informa at £3.4bn.

But after conducting detailed due diligence and following the replacement of Hellman & Friedman by Blackstone, the consortium submitted a formal offer that was 56p a share lower, and which the board rejected.

In spite of the fact that Informa is perceived as a solid business-to-business group and a defensive stock with a reasonable outlook, and the complex network of banks was taking shares of the debt as low as £50m each, the shockwaves emanating from the world’s financial capitals made it impossible to finance an offer acceptable to the board.

Alex Griffiths, senior director of telecoms, media and technology at Fitch Ratings, said: “There has been a definite tightening of the bank lending market in the past few months, and this week’s events will only have exacerbated this.

“Banks seem reluctant to extend their lending beyond existing clients and commitments, and in this environment financing a leveraged structure, even with a sturdy underlying business, was always likely to be a challenge.”

A senior executive at one of the banks involved added: “This is what you might call an Oliver Twist moment: don’t go around asking for more.”

The implications for the only two major outstanding deal processes in the media sector are mixed, according to Claire Enders of Enders Analysis.

“I think the TNS deal [a £1.2bn shares and cash offer for the market research company from WPP] has a reasonable chance of being completed even though the credit crunch creates significant constraints, even for Sir Martin Sorrell [chief executive of the world’s second-largest advertising company.”

But she was less optimistic about the sale of Reed Business Information, a division of Reed Elsevier, for which initial bids of between £800m and £850m are believed to have been received from several private equity groups. “It is not going to be easy to complete,” Ms Enders said.