Summary:

So now that the closely watched auction process for Reed Business is off, what’s the post-mortem, and what are the next steps? For starters,…

So now that the closely watched auction process for Reed Business is off, what’s the post-mortem, and what are the next steps? For starters, it is a horribly depressing environment within the company right now. It isn’t pretty to not be wanted by your parent company, and be paraded by Reed Elsevier (NYSE: RUK) management over the last year as the division that doesn’t have a long-term future. Secondly, this was a “horribly bungled” auction process, as one source close to the process told me, from the way it was declared that the division was for sale, to disagreements over whether to sell it in one piece, or along geographical or divisional lines, to how long it took UBS to get the book out, to the arrangement of staple financing, to the departure of RBI global CEO Gerard van de Aast, to disagreements over whether the parent should keep stake in RBI, to well, the worst timing in the history of such processes. Likely that the $1.2 billion in staple financing in the end proved to be the undoing, as financing commitments from the six banks would have proved much harder to materialize.

The next steps? Reed Elsevier says it will sell off RBI in the next two to three years after the macro-environment improves. What happens to RBI, now run out of UK by Keith Jones, in the interim? Likely major job cuts, including in the U.S., and closure of some magazines/divisions within it. Then after this holiday season, expect some piecemeal bids for divisions within RBI: for instance, expect someone like Strauss Zelnick to want to own the high-profile Variety, which comes under media division…hence a possible bid for that division. His company was part of the Apollo consortium that dropped out late in the process. Then RBI’s construction trade division could get some bids from the likes of Hanley Wood or McGraw Hill. And possibly UBM to come in and bid for the electronics titles. Also, expect some senior RBI management to think of other options, and possibly leave (the RBI site needs to be updated, by the way).

Meanwhile, Variety’s still celebrating, incredibly, despite its recent layoffs. It has recently moved into a new, more expensive building, at 5900 Wilshire, and later tonight the new building developer Ratkovich Company will celebrate the completed move by “flipping the switch” to light the Variety red logo atop the 31-story tower for the first time, at 6:01 p.m. PST. RBI leased about 55,000 sq. ft. of space at the new building, with more than 200 employees, will occupy the top three floors there. Again, timing matters…

By Rafat Ali

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