Wednesday, January 10, 2007

No, not again those merger rumours

With a fresh year ahead, private equity seems to be looking again for victims. Last year VNU was taken off the stock exchange and acquired by the private equity firm Falcon. The first half year results were disappointing for the performance, but this year the results should be better than under the old VNU management. I personally doubt this. The company might pick up extra revenues from the sale of the European Business Publications.

Last Friday Reed Elsevier made its highest profit on the stock exchange in two years. It immediately triggered rumours of a merger between Reed Elsevier and Wolters Kluwer. It would be the third time that these two Dutch companies would attempt a merger. First there was a hostile attempt by Reed Elsevier in the eighties, In1997/98 there was a second attempt, but this time the European Commission put such conditions to the merger that it was not interesting. Now there is rumoured to be a third attempt, which is denied by both companies.

Both companies together would be worth 21 billion euro, of which 6,9 billion euro for Wolters Kluwer. The CEO of Wolters Kluwer has been the company in shape, making it lean and mean and ready to grow in the legal sector, while selling off the educational division. Reed Elsevier has improved its performance and is now also looking at strategy again, by putting Reed Elsevier Business up for sale.

These sales options feed the speculations as the companies would go on the next track in their strategy. Reed Elsevier would concentrate more on scientific publications and Wolters Kluwer on law and accountancy publications as well as medical publications and services. This would make a very profitable combination.

Against the rumours speak the present sales of the business section by Reed Elsevier and the educational section by Wolters Kluwer. Reed Elsevier is understood not to be interested in the educational division of Wolters Kluwer. SanomaWSOY Group, Pearson en Lagardère are said to be interested as well as private equity groups. 3i still has the ex VNU educational division Malmberg in their portfolio. A merger could be interesting. The business section of Reed Elsevier would be a perfect fit for VNU Business Publications; so private equity will most likely pick it up.

The merger of Reed Elsevier and Wolters Kluwer would have been the final play in the Dutch publishers’ leap in the international publishing world. From 1980 onwards all three Dutch companies, VNU, Elsevier and Kluwer, started to get their toes into international waters. VNU survived till last year, when it was acquired by private equity. Elsevier merged with Reed and has been growing since, leaving the newspaper and consumer sector of publishing, while Wolters Kluwer left the newspaper. Reed Elsevier tried to grow in the legal sector, while Wolters Kluwer moved into the direction of health. But both companies were ready for the digital world, but not for trading on internet. But now they are growing towards each other, almost making a perfect fit.

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