Springer Science and Business Media is to be sold to EQT, a Swedish private equity (PE) firm, and GIC, a PE fund backed by the government of Singapore. The deal is expected to close by late January or early February 2010. The German company is the world’s second largest scientific, technical and medical publisher after Reed Elsevier and was formed in 2003 by the merger of Kluwer Academic Publishers and Bertelsmann Springer.
The announcement of the purchase comes only days after British media group Informa, under pressure from shareholders, pulled out of discussions to buy the company, saying it could not close the deal within the timescale required by previous PE owners Candoven Investments and Cinven.
The details have not been disclosed, but it has been estimated that the deal is worth €2.3billion ($3.4 billion). The deal is priced to take into account the fact that the purchasers will take on Springer’s debt pile which is in excess of €2 billion ($2.9 billion). EQT is to buy 82% of the company and GIC the remainder.
Derk Haank, Springer’s CEO, described “constructive and collegial discussions” with EQT and added that the deal “will allow us to move our ambitious and ongoing ‘e’ strategy forward”.
What are the implications for the publishing industry? Compared with the deal values which were being touted when Candover and Cinven were originally trying to offload the business, EQT have got themselves a bargain. According to the Financial Times, the purchase values Springer at around 8 times earnings before interest, tax, depreciation and amortisation, which is similar to rival Reed Elsevier. Springer’s business is sound, turning over €880 million ($1290 million) in 2008. The looming squeeze on public sector budgets introduces a very real note of uncertainly into the equation, but in general Springer is operating in markets with reliable cash flow and low reliance on advertising.
For those inclined to look for green shoots of economic recovery, the deal says most about the state of the leveraged buyout sector. The deal is Europe’s biggest private equity transaction for more than a year, and an indication that the PE industry is pulling out of the credit crunch. Whether or not this is a good thing for the publishing sector will no doubt be open to debate. Possible buyers from within the publishing industry who, in less turbulent times, might have been interested in an acquisition of Springer, do not appear to have been in a position to do so, probably either because of regulatory concerns or because they have their hands full with their own business challenges.
Intriguingly, there is still speculation that a merger between Springer and Informa could lie in the future, but for the time being this draws a line under a particularly convoluted and long-drawn out courtship ritual.