UBM says: The transaction is a significant step for UBM in executing its “Events First” strategy as it increases the Company’s focus on the attractive, high growth global events sector.
Following completion of the transaction, £245m is proposed to be returned to shareholders by way of a special dividend, with the remainder retained to provide greater financial capacity to drive the strategy through bolt-on acquisitions
Transaction
The total sale price of $841m represents excellent value for UBM’s shareholders, being a c.11.2 times multiple of PR Newswire’s 2014 adjusted earnings before interest, tax, depreciation and amortisation, while the cash value of $810m represents a c.10.8 times multiple
Net cash proceeds received on completion are expected to be approximately £498m after adjustments for transaction expenses, debt-like items, tax and a contribution of £10m to UBM’s pension scheme.
* The agreement is subject to anti-trust clearance in the US. Completion is expected late in Q1 2016
* The transaction requires shareholder approval and a circular is expected to be posted to UBM shareholders shortly
Use of proceeds
* Shortly after completion, UBM proposes to return £245m to shareholders by way of a special dividend which would be accompanied, subject to shareholder approval, by a share consolidation
* The retained net cash proceeds received on completion, of approximately £253m, provides UBM with greater financial capacity to drive its “Events First” strategy through bolt-on acquisitions. UBM sees a good pipeline of opportunities
Impact on the Continuing Group
* The transaction will be dilutive to EPS initially. However this dilution will be partially mitigated by the proposed share consolidation accompanying the special dividend. Further, as the retained proceeds are reinvested in line with UBM’s strict financial returns criteria the dilution will be progressively reduced
* UBM’s existing progressive dividend policy targets 2 times cover through economic and biennial cycles. Following the disposal of PR Newswire, the Company intends to maintain this dividend policy on a dividend per share basis (following the special dividend and share consolidation) and to continue to focus on growing dividend cover towards its stated target
* UBM will maintain its published financial policy, with a target leverage range of 1.5x-2.0x net debt/EBITDA, retaining the flexibility to stretch for good reason on a 12-18 month horizon and a minimum leverage target of 1.0x
* Following the transaction, UBM expects to maintain its investment grade status with the credit rating agencies
* PR Newswire will be treated as Held for Sale when UBM reports its full year results for 2015 on 25 February 2016
* The preferred equity will be held on the balance sheet at fair value ($31m). The par value of $40m attracts an 8% PIK coupon and is expected to become payable on a realisation event at GTCR Canyon Holdings (Cayman), L.P.
* Following the disposal of PR Newswire, the tax rate on adjusted Profit Before Tax for the Continuing Group is expected to be approximately 16%
On 10 November 2015, the Group released a trading update for the current financial year up to that date. There has been no change in UBM’s assessment of trading since that time.
Tim Cobbold, Chief Executive of UBM plc, said: “Today's announcement represents a significant step in the execution of UBM’s “Events First” strategy, the objective of which is to become the world’s leading focused B2B Events business. The Board is confident that this transaction realises excellent value for our shareholders.
Following the successful acquisition of Advanstar in 2014, the disposal of PR Newswire further increases our focus on the attractive, high growth and high margin events sector with more than 80% of UBM’s continuing revenues generated in Events.
In addition, the retained sales proceeds will increase our capacity to invest in bolt-on acquisitions to strengthen the portfolio and grow the business faster, whilst maintaining appropriate financial discipline.”
