Events and business information company, Informa PLC (LON:INF) has made a £3.9bn formal offer to buy rival UBM PLC (LON:UBM).
UBM shareholders will receive 1.083 new Informa shares and 163p in cash for each of their shares to create the world’s largest business events company with a stock market value of £9bn.
READ: Big event: Informa and UBM to merge, creating a £9bn B2B information services group
Based on Informa’s closing price of 765p on January 15, the last day before the start of the offer period, the deal represents a value of about 971p per UBM share or £3.9bn.
Informa said the deal marks a premium of 29.9% to UBM’s share price on January 15.
The offer confirms the terms of a tie-up proposed two weeks ago.
“Our recommended offer for UBM promises to create a leading B2B information services group with the international reach and market capabilities to take full advantage of these trends,” said chief executive Stephen Carter.
"The enlarged group has the potential to deliver strong growth and significant value for shareholders.”
Merger to deliver cost synergies and lift earnings
Carter said the combined company is well-placed to deliver at least £60mln of annual recurring pre-tax cost savings with about £50mln to be achieved in the 2019 financial year.
Informa expects one-off cash costs of about £80mln resulting from the integration of operations.
The deal is estimated to be earnings accretive in the first full financial year after completion.
The enlarged group will result in cashflow strength, revenue growth and positive returns, Informa said.
Informa full year in line with expectations
Alongside the announcement, Informa and UBM updated the market on full year trading.
Informa expects to report annual results in line with expectations with 3% revenue growth, adjusted earnings per share of more than 45.5p, free cash flow of about £400mln and a 6% increase in the total dividend per share to 20.45p.
All of its four operating divisions have delivered underlying revenue growth with academic publishing up 2%, business intelligence up 2.2%, global exhibitions up 7.6% and knowledge and networking up 0.1%.
UBM to report 2017 revenue growth
UBM said expects total revenue of £1bn for the year ended December 31, 2017, up from £863mln the previous year, after better-than-expected fourth quarter trading.
Adjusted events revenue is forecast to rise by at least 5% or by 3.5% on an underlying basis.
It estimates the adjusted operating profit margin will reach 29%, compared to 27.2% in 2016, helping the full year outturn to be ahead of expectations.
The total dividend for the year is expected to be lifted by 6.8% to 23.4p.
UBM also announced that acting chairman, Greg Lock, has been appointed as non-executive chairman.
Cost synergies the 'key highlight' of takeover bid
Analysts at Liberum said the main highlight that is likely to please the market is that Informa is pointing to at least £60mln of pre-tax cost synergies, which is higher than the £50mln expected.
“We believe the £60mln is conservative given UBM is a business that was seen as quite cost-heavy,” it said, repeating a ‘buy’ rating and target price of 687p.
On Informa’s trading update, Liberum said it was line with expectations but the target of at least 3.5% underlying revenue growth for 2018 is “positive and better than our 2.8% forecast”.
Shares in Informa rose 1.4% to 697p in late morning trading while UBM jumped 4.3% to 907p.