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VNU’s Hollywood Reporter Fires 10; Later The Dutch-American Company Announces It’s Firing 10% of Its Global Workforce in 2007, And It’s Selling Its Business Media Europe Group – Welcome To Private Equity Firms Buying Media BusinessesThe one thing a media employee does not want to hear is that the company is being bought by private equity firms. That usually translates into massive layoffs as the company is restructured to be made ready within, say, five years or less, for further sale at a mighty profit. Case in point – take a look at what is happening at VNU.
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Otherwise it was relatively calm until this month but now the hatchet is being wielded. At the infamous Hollywood Reporter 10 positions, including the editorial director Howard Burns, were cut. Burns allegedly told staff, “If I told you this was voluntary, I’d be lying.” That happened just days after Matthew King, the top editorial executive, left the newspaper, a Hollywood movie industry daily read since the 1930s.
But then Monday VNU let loose its big salvos. Not only was it selling its Business Media Europe (BME) group for around €320 million ($415 million) but also it was planning on cutting 10% of its workforce – some 4,000 jobs – in 2007 to save costs.
The idea, according to David Calhoun, the new ceo, who had spent 27 years at General Electric, is to integrate “the media and consumer information that our clients need to succeed.”
The European publishing group is being sold to 3i, another venture capital and private equity company, so those BME employees need to watch out, too; this is just the beginning for them. The group includes more than 70 print titles publications in the UK, Germany, Italy, Spain, the Netherlands and Belgium as well as various web sites including VNUnet which is aimed at the IT industry and attracts around 10 million unique visitors monthly. Negotiations are still ongoing to sell the French operation.
VNU had announced in October it was looking for “strategic alternatives” for BME including a possible sale. “The company is considering alternatives for BME because the group’s activities are not well aligned with VNU’s marketing information and media measurement business,” a company statement said at the time. That caught many by surprise because it had been reported that the VNU sale contract required the buyers not to make major changes to VNU’s business for 18 months from the time of the sale.
The translation of all that is that the Nielsen measurement business is the real cash cow, and all the rest is secondary, including US publications like the Hollywood Reporter and Billboard. VNU has not announced it is looking to sell its US publications.
How serious are private equity firms in achieving their goals? At the time Calhoun was lured from General Electric it was said it was with a package worth $100 million if he meets certain corporate goals. He no doubt is willing to do whatever it takes to earn that kind of money.
According to Thomson Financial, private equity firms like KKR and Blackstone have accounted for some $370 billion of the $1.4 trillion in US merger deals this year. That’s a lot of money being invested by people looking to make a lot of profit. And that usually translates into getting rid of those parts of a bought business, or people in those businesses, that don’t help meet tough financial targets. Bob Filek, a partner at PricewaterhouseCoopers, noted in a recent report that media was among those sectors that can expect the most activity in private equity deals next year.
For instance, in the US Intermedia Partners LP is buying 17 outdoor magazine titles from Primedia for $170 million and Readers Digest announced in November its sale to Ripplewood Holdings for $1.8 billion. But the real biggie was announced just last week in Europe when KKR, one the VNU owners, agreed with Permira Advisers to buy German TV broadcaster ProSieben Media for some €5.9 billion ($7.8 billion), planning to combine it with SBS Broadcasting that it already owns.
The feeling in Germany is that TV advertising is expected to improve by 2008 and that is KKR’s and Permira’s target for shaking out all unnecessary costs in the combined company and putting it on the market by then for sale at a big fat profit.
All of which is why, when one looks at the possible Tribune sale which could come up in Q1, 2007, take a look where the money is coming from. Private equity investment is great for the seller, but for those who get sold it is just the beginning of worrying about one’s future.
Who in America really knows what VNU is? But mention Nielsen television ratings and other assorted ratings businesses and the company is far better recognized. And since the bulk of its business is in the US then what’s the point of using the initials of what was just a Dutch company? With that in mind the only real surprise is that it took the company’s new owners this long to rename the company to Nielsen Company.
The private equity groups, including Carlyle Group and Kohlberg Kravis Roberts & Co., that bought The Dutch company last August has been busy restructuring ever since, including placing all of its senior executives in New York although it still maintains offices in The Netherlands. It has cut around 4,000 jobs – it still has 42,000 employees -- and has agreed to sell its European business magazine division.
The company also publishes Billboard Magazine, Adweek, and The Hollywood Reporter but has said it does not intend to sell those titles, but will seek ways to bind them into the new company identity.
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VNU, a Dutch based publishing and information giant, whose crown jewel is Nielsen Media Research, got bought out in June for $9.7 billion (€7.7 billion) by Valcon Acquisition BV, a consortium of six equity firms -- the Carlyle Group, the Blackstone Group, Kohlberg Kravis Roberts, Hellman & Friedman, Thomas H. Lee Partners, and AlpInvest Partners. VNU is now officially a Dutch private company, but all of its corporate executives are based in New York.