Goldman Sachs backs plan to break up Emap
Investment banker Goldman Sachs is said to be backing a plan to break up UK media group Emap as the company’s share price hit a four-year low of 720p.
LONDON (Brand Republic) - Investment banker Goldman Sachs is said to be backing a plan to break up UK media group Emap as the company’s share price hit a four-year low of 720p.
The banker believes Emap’s value could triple if the business was broken up. It forecasts that lucrative radio station Kiss FM could be worth £1bn alone and the business in total could be worth £3bn. This compares with a current market value of £1.9bn based on Friday’s closing price of 720p.
A number of senior media figures are understood to have been approached by Goldman Sachs about running the business if a bid was tabled. Richard Eyre, the former ITV and Capital Radio chief who resigned from RTL Group last week, is understood to be the favourite.
Emap’s troubles began when it bought US publisher Petersen for £720m in 1998. The acquisition was the first major deal by the then recently instated CEO Kevin Hand. It was widely criticised by analysts and investors who thought the price paid was too high.
Since the acquisition, Emap’s share price has tumbled from around 1,100p at the time of the purchase. This morning its shares were trading at 723p. Investors have given Hand until the summer to turn the company’s fortunes around.
The US business, which publishes Motor Trend, Hot Rod and Guns & Ammo, has suffered because of a slump in the US automotive sector from which it derives a large chunk of advertising revenues.
It is also thought that the operation’s previous management overstated the company’s advertising figures. It is burdened by $650m (£453.6m) debt, declining circulation, ageing readership, high staff turnover and under-investment.
Hand is thought to have proposed the sale of the group’s business publishing arm, Emap Business Communications -- parent of Broadcast and Retail Week -- in an attempt to rescue the company’s fortunes. US private equity firm Hicks Muse Take & Furst was reported to be keen to buy the business. Hand’s predecessor and current chairman, Robin Miller, is said to have stepped in to prevent the sale of the profitable division.
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