KUHN CAPITAL Thursday, October 19, 2017
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VNU: So Shall Ye Reap

1/15/06

Seems like only yesterday that giant Dutch media conglomerate VNU had announced its intention to purchase IMS Health, the former D&B unit that dominates the drug demand data business much as VNU�s ACNielsen unit dominates the TV ratings business.

But we thought the price VNU wanted to pay, nearly $7 billion or 30x earnings, seemed awful rich for the pleasure of owning a business growing at about 5% with a sketchy profit history. (See our 7/11/05 blurb on the subject.) In fact, the deal turned into a nightmare for VNU as activist hedge fund shareholders took the opportunity to force out the company�s CEO and set the stage for a sale of the business.

Now comes news that those efforts have led to an offer from a group of private equity players -- Carlyle Group, Blackstone Group, Kohlberg Kravis Roberts & Co., Thomas H. Lee Partners, AlpInvest Partners, Permira and Hellman & Friedman -- to purchase VNU for $8.8 billion, a price that offers no premium over a current market value of about 23x 2006 forecasted earnings.

While many analysts see greater value in VNU than this, the story is nonetheless a testament to the rising power of hedge funds and private equity groups to shake up entrenched company management and boards. And it's a warning to the ineffective that, increasingly, they are being watched by those with the power to make changes.

Expect to see more evidence of this �spoiler� combination of hedge funds and PE groups at work in 2006 and beyond.


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