UBM dives over fears it overpaid for Advanstar
COMMUNICATIONS and events group UBM will buy US trade show organiser Advanstar Communications for $972m (£599m), it announced yesterday, becoming the top events organiser by revenue in the US, but its shares fell on concern it had overpaid.
UBM said it will fund the deal through a £563m rights issue, which also dampened market sentiment as shares fell 5.92 per cent yesterday to close at 548.50p.
While analysts were surprised UBM had not opted to sell its PR Newswire business to fund the transaction, most were positive on the deal’s business rationale.
“Strategically, this deal makes a lot of sense: it makes UBM even more of an events business; it makes them the largest player in North America and reduces their exposure to China, which has been a concern for investors recently; and it should take net debt to one times profits by the end of 2015,” said Liberum’s media analyst Ian Whittaker.
“So, while we would have prefered a sale of PR Newswire to fund this, the deal makes sense.”
UBM said the deal would immediately add to profits upon completion at the end of the year and add about £135m to its events revenue in 2015.
Advanstar operates 54 trade shows and about 100 conferences annually, including the biannual Magic fashion trade show in Las Vegas, the largest of its kind in the US.
“In addition to being financially attractive, it strengthens UBM’s core events business while balancing and complementing UBM’s strong events portfolio in emerging markets,” said UBM chief executive Tim Cobbold on the deal.
UBM bought Advanstar from hedge fund Anchorage Capital Group and private equity firms Ares Management and Veronis Suhler Stevenson.
The company has changed hands several times over the years between various private equity firms.
JP Morgan advised UBM on the financial aspects of the deal, while JP Morgan and Credit Suisse are joint brokers and underwriters for the rights issue.