Watching Emap’s share price during recent years was the stockmarket equivalent of watching paint dry. Despite investing more than £800m (€1 billion) in acquisitions since 2003 and raising a similar amount through disposals, the UK media group’s share price stuck stubbornly around £8. Last summer, the board took a huge step to give it the ultimate shake-up, by putting each of the group’s three businesses on the block. For Ian Griffiths, Emap’s finance director since 2005, it was a career-defining experience. He helped oversee a sprawling strategic review at a time when Emap was without a CEO, and organised a buyout of its pension funds to ensure that the acquirer wouldn’t have to deal with the deficit. All this while the credit crunch loomed and consumer markets looked decidedly shaky. (See “Take It Away,” February 2008.)
The hard work paid off. In December Emap sold its radio and consumer-magazine businesses to Germany’s Bauer Publishing for £1.14 billion. Two weeks later it announced the sale of its business-to-business (B2B) division and Emap PLC to Guardian Media Group (GMG) and Apax Partners (a private-equity firm) for £9.31 per share, including a dividend of about £4.60. “We set out to create value for shareholders and we’ve done that,” Griffiths says today.
Despite the pressures, the finance chief says he enjoyed the process. As the group’s head office empties and Griffiths prepares for his final weeks as an Emap executive, he tells CFO Europe what he learned during the break-up and why he wants to continue working for a public company.
You say Emap’s share price was “stuck” for about seven years. What was the problem?
There were always challenges holding back the group’s overall performance, whether radio or B2B recruitment was having a tough time or consumer launches weren’t working. It was a media conglomerate and it was hard to say what the compelling investment story was for the business, which held back the share price.
Our chief executive, Tom Moloney, left the organisation in May . We announced we would recruit a replacement, but also agreed it was an appropriate time to look at each of the businesses’ performance again, because some of the areas we operated in were tough, particularly consumer markets. We needed an honest appraisal of what the businesses could deliver over the next three to five years. And when we did that, we believed there was a premium not reflected in the share price.
What were the alternatives to breaking up the group?
One was to stay as we were and appoint a chief executive. The others were variations on demergers — would there be a re-rating of the B2B and consumer businesses if they were separated? The only way to test the value of an asset is to see how much someone will pay for it, so the main work was preparing the business to be sold. We went through weeks of vendor due diligence, led by Ernst & Young, which asked all the questions that potential acquirers would. So once we engaged with potential buyers in late August, we could give them the information they needed.