UBM eyes US events group Advanstar

UBM said on Thursday that it was in talks to buy US events group Advanstar, in a deal that would represent a shift in strategic direction for the exhibitions company under its new chief executive.

Analysts estimate that the FTSE 250 group could pay as much as $900m for Advanstar, which would be UBM’s biggest transaction since 1999, when it bought CMP Media for $920m.

To fund the potential deal, UBM was likely to need to carry out a rights issue or sell PR Newswire, its division that helps companies distribute announcements online, analysts said.

UBM said in a statement on Thursday that the discussions “may or may not lead to a transaction” and that it would reveal further details about the potential deal in due course.

Tim Cobbold took over as chief executive of UBM in March after several years running banknote printer De La Rue. David Levin, his predecessor at UBM, was known for shunning large acquisitions and favouring smaller bolt-on deals that he believed were less likely to destroy value for shareholders.

Advanstar is owned by hedge fund Anchorage Capital Group and private equity firms Ares Management and Veronis Suhler Stevenson. Advanstar has 54 trade shows and 100 conferences in the US and UK, with its main industry segments being fashion, health and motorsports. It also operates 30 publications and 200 websites.

According to Moody’s, Advanstar’s 2012 revenues were $293m. It generates roughly $95m in earnings before interest, tax, depreciation and amortisation, Reuters has reported.

Large exhibitions businesses have typically sold at multiples of 8-12 times ebitda. In 2013, Nielsen sold its exhibitions business to Onex Corp, the Canadian private equity firm, for $950m – a multiple of 10 times ebitda.

Malcolm Morgan, analyst at Peel Hunt, said that if a deal goes ahead and is funded by debt, then UBM’s balance sheet “would look perilous”. He added that investors were unlikely to welcome a large rights issue to raise cash and would prefer a sale of PR Newswire.

For years, analysts have put pressure on UBM to sell PR Newswire, which is the last big division within UBM that is not directly related to putting on events. PR Newswire, which has an operating profit of about £45m, has been valued by analysts in a range from £350m to £600m.

Over the past decade, UBM has transformed itself from a UK-focused media conglomerate centred on magazine and television assets into the world’s second-largest exhibitions business – deriving a third of its profits from emerging markets such as China and Brazil. Adding Advanstar to its portfolio would substantially increase its presence in the US.

UBM, which has a market capitalisation of about £1.5bn, is the world’s second-biggest exhibitions organiser after Reed Elsevier. Rivals include Informa, ITE Group and Tarsus.