Another day, another triumph for the UK stock market. The latest case in point? Ascential, that smorgasbord of digital commerce, product design and events once known as Emap.
To demonstrate its value to London’s comatose investors, it is smashing itself up. And not just a bit of “conscious uncoupling”, either, from the Gwyneth Paltrow and Chris Martin school, or even Miss Piggy and Kermit the Frog. No, a three-way split, with the sale of two businesses.
The upshot? Cash proceeds of £1.2 billion, representing 126 per cent of Ascential’s pre-deal market value. Plus, the group still hanging on to its best-known division, last year delivering £72 million of “adjusted ebitda” on £191 million sales — the events wing that puts on the Cannes Lions jamboree, where the likes of Spike Lee turn up to detract from all the ad men. No shock, then, that the shares shot up 23 per cent to 265p.
Hence the perennial question. How does the London market keep mispricing companies, undervaluing takeover targets such as car dealer Pendragon, say, or its rival Lookers, while overpaying for last week’s float fiasco CAB Payments or the derelict shed formerly known as Matt Moulding’s The Hut Group?
Emap hadn’t done a lot wrong since February 2016’s float at 200p, the latest instalment in a journey that began with the purchase of the Spalding Guardian in 1887 and led to 2008’s take-private deal by the Guardian Media Group and Apax, and then a subsequent relisting.
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By 2018, the shares had hit 450p. Investors had warmed to the digital commerce wing, championed by chief executive Duncan Painter, that helps big guns like Nestlé and Coca-Cola sell products online; its WGSN design outfit bringing fashionistas their frock insights; and the events business also starring Money 20/20. But then came Covid, since when it’s been no Ascential investment.
By January, the chairman Scott Forbes was tabling a break-up plan. But since then the market reaction has also surprised. On the day, the shares jumped 26 per cent to 262p, with Shore Capital suggesting a 388p sum-of-the-parts valuation. Yet, after that, the shares drifted down — despite March’s full-year results, with sales up 50 per cent to a record £524 million and ebitda up from £88.9 million to £121 million, plus some decent half-year figures.
Indeed, it has taken deals with an ad giant and an ex-owner for a big penny to drop. Adjust for one-offs and Ascential will clear £638 million from selling the commerce wing to Omnicom and £572 million from offloading WGSN to Apax. The result? The group can now hand back £850 million, while retaining an events arm chipping in almost two fifths of sales and about half of ebitda — a potential takeover target that Citi analysts think is worth 150p-plus a share. Ascential will now be run by events boss Philip Thomas, what with Painter Omnicom-bound.
So, finally, the UK market has clocked the value in Ascential — hard to spot, apparently, as investors struggle to detect it in businesses that aren’t pure-play even when the same ones invest in private equity conglomerates. Perhaps Ascential could put on an event educating London’s fund managers into seeing what’s in front of them.
Bad connection
Investors can take only so much provocation. So the board of Digital 9 Infrastructure can’t be surprised that its botched efforts “to drive a sea change in global connectivity” have provided a fast link to an irate investor: the 3.5 per cent holder Aqua Ventures that says it speaks for a fifth of the register.
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Having raised $400 million at March 2021’s £1-a-share float, the investment trust’s board, under chairman Phil Jordan and its manager Triple Point, have made endless goofs. And none worse than last month’s “screeching U-turn”, as Investec analysts put it, to axe a 6p interim dividend it had reaffirmed as recently as July, with the warning there was “material uncertainty” over its going concern status.
It sent the shares down 40 per cent in a day. And they have only just risen 11 per cent to 44¾p after Aqua threatened to call an EGM to oust directors unless they do a “strategic review” — rather than pressing on with the sale of its “crown jewel” business, Verne Global, a data centre operator valued at about $500 million. The board sees it as a fix to refinance a £375 million debt facility that is £364 million drawn.
Aqua may be right that it risks “value destruction by stranding the company’s other assets”, though if it’s hard to see it do that for telco network Arqiva. It is also correctly suspicious of the board’s advice from JP Morgan Cazenove, when it’s the same personnel who screwed up at Hipgnosis — even if Goldman Sachs is now lead adviser. The question is, what will a strategic review achieve? The assets are already on the block and D9, trading at less than half its 100p net asset value, needs cash pronto. Aqua is yet to explain how delaying things for a messy review doesn’t risk an even bigger fire sale.
Drill into Upland
Upland Resources one week, Downland Resources the next. It was only seven days ago that, after a flurry of updates over the exercise of warrants and directors’ options, the Malaysia-focused oil group said it had not only received “an unsolicited, very preliminary” takeover approach from SEC Capital at 14p a share, but turned it down; a punchy rejection, too, given it was at a near-400 per cent premium.
And now? Well, after the market closed on Friday, Upland disclosed that a chap it thought linked to the bid, Egerton Capital co-founder William Bollinger, said it had zip to do with him. And Upland now says the offeror was not “bona fide”, so taking the fizz out of the shares, down 41 per cent to 2¾p. Quite a lot here for the regulators to drill into.
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alistair.osborne@thetimes.co.uk
