Transaction highlights
• UBM to become the leading worldwide provider of tradeshow and related media for the growing medical device design and manufacturing market and adjacent advanced manufacturing sectors
• Creates excellent growth opportunities, particularly in emerging markets, leveraging UBM’s worldwide tradeshow infrastructure and expertise
• Complements UBM’s existing electronic engineering business, creating a richer set of information and marketing services
• Expected to be approximately 9% EPS accretive in its first full year of ownership, with Return on Investment in that year in excess of cost of capital
• The $287 million consideration represents a multiple of 7.8x EBITDA (LTM 30 June 2010); the transaction will be funded from existing bank facilities
• Continues UBM’s strategy of investing to establish strong positions in B2B markets that provide rich opportunities for profitable growth worldwide
• The transaction is subject to Hart-Scott-Rodino (HSR) antitrust clearance
David Levin (pictured), Chief Executive Officer, UBM said: "The acquisition of Canon is an exciting step for UBM, building on our track record of identifying, completing and integrating value-enhancing acquisitions over the last five years. Canon is a great strategic fit for us: it gives us a complementary portfolio of market-leading branded tradeshows and related products which serve highly attractive growth markets experiencing globalisation. The combination of Canon’s brands with both our worldwide infrastructure and our existing electronic engineering business offers us exciting growth opportunities, particularly in Canon’s core medical device design and manufacturing markets.”
“The management team, led by Charlie McCurdy, have done a great job in developing the Canon business. I look forward to welcoming Canon’s staff to UBM and to working with them as we accelerate Canon’s growth."
Canon description
Canon is a leading provider of tradeshows and related media products serving the global advanced manufacturing sector. The business’s principal focus is on the medical device design and manufacturing (known as MD&M) and electronics engineering markets – together representing over 65% of revenues and contribution (see Notes for definitions) – supported by strong positions in related manufacturing process, packaging and design segments.
Canon employs a total of 343 staff worldwide, of whom 278 are based in the US (144 at Canon’s Los Angeles headquarters), 48 in Asia and 17 in Europe. Canon’s senior operational management team is expected to remain with the business, which will be renamed UBM Canon. Charles McCurdy will support UBM during transition in a consultancy role.
Events – Canon produces seven key co-located series of events, comprising 41 individual tradeshows occupying more than 120,000 net square meters of exhibition space and attracting 115,000 qualified attendees and 9,400 exhibitors annually. Canon’s events take place principally in the United States but also in Asia and Europe. These tradeshows generate approximately 48% of Canon’s revenues. Sixteen of Canon’s event brands serve the MD&M market, which – including associated online and print products – represents 42% of total revenues. Canon is the MD&M tradeshow market leader in the US and has successfully expanded its portfolio internationally with the launch of MD&M-related tradeshows in both Asia and Europe. Canon’s leading tradeshows include MD&M West (California), MD&M East (New York) and MEDTEC Europe (Stuttgart). These tradeshows rank as the world’s largest trade events in this market and will be included within UBM’s top 20 shows by revenue. Canon’s other events serve adjacent advanced manufacturing markets.
Online – Canon’s online business comprises 45 websites and more than 100 email newsletters, as well as webcasts, online video production and its proprietary Qmed lead generation product, which provides qualified leads to the MD&M market (see www.qmed.com). These assets generate 17% of Canon’s revenues. By integrating user data from these products with tradeshow registration and magazine subscriber information, Canon has developed a comprehensive audience database of 1.3 million executives and engineers involved in purchasing and buying in advanced manufacturing businesses.
Print – Canon’s tradeshows are supported by 24 advanced manufacturing-focused magazine titles, which generate 35% of total revenues. Titles serving the electronic engineering segment (Canon’s second largest market, generating 24% of Canon’s revenues across all products) represent the largest component of the print portfolio, followed by MD&M and manufacturing process and packaging titles.
Strategic opportunity
The acquisition of Canon brings UBM event leadership in the attractive, growing MD&M market. Industry analysts forecast that the fragmented and innovative market for medical devices will grow globally at 6% CAGR 2009-12, with the highest levels of growth coming from the Asia-Pacific region (10% CAGR 2009-12).
UBM will leverage its existing global tradeshow infrastructure and expertise to geo-clone Canon’s events in fast-growing economies such as China, India and Brazil. Canon has already successfully launched a tradeshow for the MD&M sector in China, where industry analysts forecast growth of 10% CAGR 2009-14 for the medical equipment market on the back of major healthcare reforms. A number of new events are also planned for both developed and emerging economies.
Canon’s US events expertise, databases and marketing services capabilities will augment and advance UBM’s existing US tradeshows in markets such as packaging, ingredients and specialty chemicals. Canon’s regionally-based co-located tradeshow development practice provides UBM with an operational model to further leverage its brands in US markets.
Canon’s print and online product portfolio complements UBM’s existing position in the electronic engineering market, allowing it to provide a richer set of information products and services for the electronic design and engineering community. The electronics engineering market is structurally attractive, with industry analysts forecasting a rise in global semiconductor revenues to $344 billion by 2014 (9% CAGR 2009-14). UBM is already active in the emerging medical devices market with UBM TechInsights producing the first ‘teardown’ analyses of the physical and intellectual property components of medical devices.
Financial information
In the twelve months to 30 June 2010, Canon generated $106 million (£68 million) in revenues and $37 million (£24 million) in EBITDA on a pro forma basis (see Notes for definitions). Pro forma revenues and EBITDA for the six months to 30 June 2010 were $66 million (£44 million) and $27 million (£18 million) respectively. Principally reflecting the timing of events during the year, approximately 64% of Canon’s annual revenues were generated in the first half of 2009, and we anticipate that this pattern will continue in 2010. Canon has a number of biennial events which lead to a revenue uplift of approximately $1 million in the first half of even years relative to odd years. In its unaudited balance sheet dated 30 June 2010, Canon’s gross assets were $253 million (£168 million). All financial data are based on unaudited financial information.
The consideration of $287 million (£185 million) will be funded from UBM’s existing bank facilities. UBM’s net debt at 30 June 2010 was £303 million (see Notes for definition). Pro forma for the acquisition of Canon, net debt would have been £489 million at that date. UBM anticipates that its bank borrowings will be refinanced in long term capital markets in the near future, subject to market conditions.
Excluding the impact of potential synergies, UBM expects the acquisition to be approximately 9% EPS accretive in its first full year of ownership, generating returns in excess of UBM’s cost of capital. The acquisition is not expected to materially affect UBM’s effective tax rate.
At 7 September 2010, forward bookings for Canon’s events were 3% ahead of the same point last year. UBM expects print revenues will continue to reflect the ongoing structural realignment of the publishing industry. These print revenue trends will be partly offset by expansion of the online business, where we expect double digit annual growth.
Completion and regulatory clearance
The transaction is subject, amongst other things, to Hart-Scott-Rodino (HSR) antitrust clearance. Completion will occur shortly after clearance has been granted.
UBM has been advised by Allen & Company on this transaction.
