Wednesday, March 8, 2006

VNU Finds Suitors, but Shareholders Don't Find Them Suitable

Reuters reports along with The Wall Street Journal and other majors the proposed USD 9 Billion cash takeover of VNU by a group of private equity firms that is meeting yet again with a cool reception from its institutional investors. Several holders of VNU are dead set on splitting up VNU assets here in now to gain more value, in spite of what WSJ points out would be adverse tax considerations to do so. Is VNU undervalued? This may be a matter of shareholders staring at the gate after the plane has left. When the deal to acquire IMS Health went sour there was still a relatively hot market for acquiring mainstream media titles based on the return of reasonably strong print performance for B2B media and the promise of online growth through VNU's increasingly sophisticated editorial and marketing strategy.

The thunder from many of last year's deals is long gone, though, as investors look at an increasingly soft market for print and a focus on media market coverage that is becoming more dispersed as both producers and channels multiply. This does not necessarily favor long-established titles such as Hollywood Reporter and Billboard that are focused on the industries that have the most to lose from these changes. The sagging ratings for the recent Oscars television broadcast underscore the problems of tracking an industry trying to find its soul anew. Somewhat related problems exist on the Marketing and Media Measurement sides of VNU's business as viewership patterns in television migrate to new online and offline channels faster than many had imagined, but with still a high level of support from institutions that need these services in order to survive and set strategies and increased investment in new measurement models.

The bottom line is that the VNU valuation for this buyout is overall a very fair deal considering market conditions and the work that needs to be done to provide a better focus for VNU's considerable assets. Yes, the pieces could have value independently that would be of interest to the markets, but each of those pieces face challenges in their core markets that may require more restructuring and more growth in demand for their capabilities before that value could be realized. In the meantime VNU needs to focus on accelerating its core marketing strategies to make sure that they can keep up with rapidly shifting markets for their services. Its time for VNU shareholders to stop staring at the gate and to realize that markets have moved on to the point that their expectations are no longer realistic.
Post a Comment