BERLIN: KKR & Co. is seeking to buy out minority shareholders of Axel Springer SE in a deal that would value the German publisher at about 6.8 billion euros ($7.7 billion).
KKR offered to pay 63 euros a share in cash -- a 13% premium over Tuesday’s close and about 40% more than the price before Bloomberg reported the talks last month. The move is backed by largest shareholder Friede Springer and Chief Executive Officer Mathias Doepfner.
Axel Springer shares rose as much as 13% to 63.30 euros in early trading in Frankfurt.
The private-equity firm’s involvement would hand Doepfner additional financial resources to help the tradition-rich publisher of the Bild mass-circulation daily with the costly and challenging process of transforming into a digital media group, making it easier to acquire struggling rivals.
Axel Springer lowered its sales and profit forecast for the year on Wednesday, citing slower growth in classifieds.
"Our growth plans will require significant investment in people, products, technology and brands over the next years,” Doepfner said in a statement. "KKR is a long-term focused partner who respects and supports our commitment to independent journalism.”
Both Springer -- the widow of the company’s founder -- and CEO Doepfner plan to keep their holdings that together amount to more than 45% of the company. A buyout of minority investors would see Axel Springer join Bertelsmann, the German publisher that owns Penguin Random House, in being shielded from the scrutiny of public markets.
More public companies are being taken private thanks in large part to buyout firms’ swelling cash reserves. The private equity industry, including real estate, debt and venture funds, is sitting on about $1.4 trillion in unspent cash, according to data compiled by Bloomberg, as institutional investors pour client money into the funds seeking returns.
Last year, the number of public-to-private deals hit its highest in more than a decade, according to Bain & Co.’s annual private equity report.
In Germany, however, private-equity buyouts are not always successful. Shareholders of classifieds company Scout24 AG last month rejected a 4.9 billion-euro bid from private equity firms Blackstone Group LP and Hellman & Friedman.
Axel Springer’s shareholders should accept the "good” offer, bearing in mind the profit warnings for this year and next, said Sarah Simon, an analyst at Berenberg.
With EBay Inc.’s assets potentially coming up for sale, "KKR probably wants to use Springer as a platform for further consolidation in the European classifieds market,” Simon said by email.
In Germany, Springer remains best known for Bild, Europe’s biggest-selling daily thanks to its political scoops, witty headlines, and paparazzi shots of celebrities. While the publication’s print sales have dropped in the past decade, Doepfner has made up some of that lost revenue with fees paid by more than 500,000 web subscribers.
Doepfner has spent almost two decades turning the publisher into a digital media company, shedding printing, newspaper and magazine operations to push into online news with products such as Business Insider and classifieds sites including job portal Stepstone. It now makes almost three quarters of its sales from digital businesses.
The sector has been looking shakier in recent years, with several news sites closing or cutting jobs as their owners try to staunch years of losses. Older news titles are fighting back with an increasingly successful subscription-based business model, and Alphabet Inc.’s Google and Facebook Inc. are looking to muscle in on the profitable classifieds business.
Springer warned in March it expects operating earnings to decline in 2019 after several quarters of profitable growth.
KKR’s voluntary offer to shareholders is subject to a minimum acceptance threshold of 20% and further conditions including foreign investment and merger control clearances.
Axel Springer now expects sales and adjusted Ebitda to drop this year, from at the prior year’s level. "For 2020, the continuation of the growth strategy will lead to an adjusted Ebitda significantly below than in 2019,” the company said.- Bloomberg