I’ve been talking to some very smart folks over the past 24 hours about the just-announced sale of Reed Business Information, including Variety, Broadcasting & Cable and Multichannel News. Here are some excerpts from conversations:

“It is what Reed Elsevier says it is. Reed is changing the entire portfolio. reedelsevier_logo.gifIt’s smart what they’re doing. They’ll end up being a company that looks like Thomson Reuters: heavy in data. Reed recently bought ChoicePoint, this insurance data company, in a $3.5 billion deal. That’s the future.”

Variety is a pimple on an elephant’s ass. It’s small in the scheme of things, a $100 mil company with an unduplicated circulation between daily and weekly of 64,000 compared to Reed Elsevier’s revenues of $10 billion.”

“I doubt you’re going to see the RBI assets broken up and sold. The transaction costs are massive on a deal like this. Also the time and effort it takes to sell. So you sell it once if you can.”

“Who are the likely buyers? They fall into two categories: strategic and investment. These are not really long lists, certainly on the strategic side. Thompson Reuters, maybe Pearsons, Informa though it’s way too big a deal for them. No, I don’t think Nielsen.”

variety-title.jpg“RBI should sell in the $2.5 billion range. It generates between $1.7B and $1.8B of revenue, $250 million EBITDA [Earnings Before Interest, Taxes, Depreciation and Amortization], so that’s 10 times EBITDA, less than twice revenue. Reed Elsevier is looking for $3.5B. But no way. When you look at all the assets, there are some real fabulous assets — Variety, New Scientist, Flight, Estate Gazette, and a famous Dutch magazine. That’s the best-looking stuff. But there’s a lot of shit also. Broadcasting & Cable is massively challenged. It’s gaining share but the pie is dwindling. Whoever buys probably divests some of it.”

“It’s going to be hard work for whoever gets this thing. It’ll require some radical restructuring of the business. Because these businesses’ lifeline is their ability to transition to ebusinesses. But $90 mil is the print revenue stream, and the newsroom is geared to producing print. When you have systems designed for a print output first and foremost, and a staff that is geared to doing print, then the issue is the whole mindset of an organization and the work flow of an organization. You can’t minimize the amount of change management that has to be done. That’s why somebody coming in and buying this thing that does not have a sentimental attachment to it is going to do the best job with it.”

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