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RBI Sale At Risk Of Falling Through As Bidding Price Drops To $1.7 billion

Reed Elsevier’s (NYSE: RUK) troubled attempt to sell-off its UK B2B division Reed Business Information appears to be in big trouble with the news that bids for the company since August have fallen about a half-million dollars, according to Bloomberg. Two unidentified sources close to the deal told the news service the bids have dropped to about $1.7 billion (£97 million) from $2.3 billion (£1.3 billion). The company has struggled to attract the financing needed to seal the deal since the sale was announced in February. Merrill Lynch analyst Paul Sullivan said in a note that the risk of the sale “being delayed or falling through has clearly increased”. The markets were unimpressed and shares in Reed Elsevier dipped 6.4 percent to 468.25 pence at 1.34pm in London trading today, its lowest value since February 2004.

Three PE firms remain in the third round of bidding — Bain Capital LLC, Apollo Management and a combined group of TPG Inc and DLJ Merchant Banking — and seven banks are prepared to put in $900 million (£515 million) to finance the deal while Reed itself is set to put in about $330 million (£189 million). So it is still possible that a deal can be reached, but the finance shortfall, reportedly around $180 million (£102.6 million), must remain a problem at a time when banks are reluctant to invest or even lend big money.

3 Responses to “RBI Sale At Risk Of Falling Through As Bidding Price Drops To $1.7 billion”

  1. David Graham

    The value at $1.7B US is reasonable and shouldn't be discounted. It's a win-win for both Buyer and Seller. Buyer because it is a reasonable value for a profitable business and Seller because they are able to divest the burden as they shift their focus to their two remaining divisions. If a deal cannot get struck soon on the whole then Reed should break it up and sell off the primary assets at a premium value and would probably get close to a $1.0B-$1.3B US walk away. UBS should be sent home as the banker on this deal as they have added little value to making any deal work. Very poor performance probably due to being distracted about losing their jobs if UBS implodes like the other IBs.

  2. digital bear

    Shave the price across the board by 40-50% and it is a deal. Reed should be happy to get anything given how they've neglected these businesses into near oblivion- great content, no digital, weak advertising and no vision for the future. It is the perfect time for a smart PE firm to negotiate down the price after somehow spooking out the other players through rumors on their available cash (ex: TPG is saddled with DLJ and Apollo is reigning in the near term leaving Bain as the victor…)