Thomson financial deal falls apart: would-be buyer VS&A Communications Partners balks at $250 million price tag after a dismal 4Q performance

Folio: The Magazine for Magazine Management, Feb, 2002 by Mark Miller

The expected sale of Thomson Corp.'s financial print assets--including American Banker, Bond Buyer and Securities Industry News--died unexpectedly last month after nearly a year of haggling over the consistently devalued properties.

Final negotiations between deal broker Morgan Stanley Dean Witter and last-team-standing VS&A Communications Partners, Deutsche Bank and Capital Partners broke down as the team attempted to renegotiate its approximately $250 million bid.

Debt removal was one of the main reasons Thomson initially put the assets up for sale, and the greatly reduced price--from the company's expectation of close to $500 million--continually upset Thomson's plans during the bidding process.

VS&A was the one seeking a price reduction, according to one source within that organization, because the assets had suffered an even worse fourth quarter than expected.

The parade of bidders for the assets--which went on sale in late February 2001 with final offers accepted on November 5--disappeared, along with the financing market, in the wake of September II.

In 2000, the properties for sale posted $50 million in earnings before interest, taxes, depreciation and amortization (EBITDA) on revenues of $200 million, and there was an expected 2001 profit increase of more than 12 percent when the year began. In late July, the company released new revenue projections that caused bid expectations to fall $50 million into the $450 million to $500 million range. According to one banker, by the end of June, EBITDA for the assets had already fallen between $5 million and $6 million. Another industry executive says that, through the first half of this year, the assets hadn't even cleared earnings of $15 million.

Now the assets will be managed as an independent group within the corporation, managed by a stand-alone media group, says a company spokesman. Ronald Schlosser, the president and CEO of Thomson's Scientific and Healthcare market group, will head the new group.