Sanoma has signed an agreement to divest the strategic business unit Sanoma Media Netherlands to DPG Media, the leading Dutch and Belgian cross-media company. The agreed enterprise value (EV) of Sanoma Media Netherlands is EUR 460 million, corresponding to an EV / EBITDA multiple of 6.5 (LTM Q3 2019 adjusted EBITDA). Media Netherlands will be reported as discontinued operations for 2019 and Sanoma’s Outlook for 2019 is redefined to include continuing operations only. The transaction is subject to customary closing conditions and is expected to be completed latest during Q3 2020.
“Divestment of Sanoma Media Netherlands is an important step in Sanoma’s strategic transformation from a predominantly media company into a combination of a growing European-based learning company and the leading cross-media company in Finland. It provides approx. EUR 400 million headroom for M&A, enabling us to capture growth opportunities focusing especially on the learning business. With the divestment, Sanoma’s exposure to print magazine business, which as a stand-alone business is difficult to convert to digital, will be reduced,” says President and CEO Susan Duinhoven. “I am very proud of the work that our Dutch media team has done during the past years. We have reshaped the business and improved its efficiency and profitability, and in addition created growth in the online news and data business. As part of DPG, our Dutch media business will benefit from the opportunities and synergies that only a leading Dutch and Belgian cross-media company can offer,” Duinhoven continues.
About Sanoma Media Netherlands
Sanoma Media Netherlands consists of leading Dutch and Belgian magazines (incl. Libelle, Donald Duck, vtwonen) and the online news brand NU.nl.
Key figures of the divested business
|EUR million||LTM Q3 2019 adjusted *||Reported 2018|
|Operational EBIT excl. PPA||70||80|
* Last twelve months (1 October 2018 – 30 September 2019) adjusted for the divestments implemented during the period. Impact of the divestments on LTM Q3 2019 net sales was approx. EUR -20 million, on EBIT approx. EUR -4 million and on operational EBIT excl. PPA approx. EUR 2 million. More information on divestments is available at https://sanoma.com/investors/sanoma-as-an-investment-3/acquisitions-and-divestments/.
In 2018, 60% of the SBU’s net sales were print based, 29% non-print, and 11% other sales, mainly distribution sales under Aldipress. At the end of September 2019, Media Netherlands had 977 employees (894 FTE), who will transition with the divested business to the buyer.
Financial impacts of the divestment
The agreed enterprise value (EV) of Sanoma Media Netherlands is EUR 460 million, corresponding to an EV / EBITDA multiple of 6.5 (LTM Q3 2019 adjusted EBITDA). Sanoma will use the funds received from the divestment to reduce its debt. As pro forma 30 September 2019 including the impact of the divestment, Sanoma estimates that its net debt would have amounted to approx. EUR 346 million (reported EUR 798 million) and the corresponding net debt / Adj. EBITDA to approx. 1.6 (reported 2.8). Total goodwill in Sanoma Group’s consolidated balance sheet is expected to decline by approx. EUR 540 million to approx. EUR 575 million (reported EUR 1,115 million).
Due to the divestment, Sanoma estimates to book a non-cash capital loss of approx. EUR 110 million including divestment-related transaction costs, which is expected to reduce its equity ratio temporarily below the long-term target level of 35-45%. Sanoma will book the divestment-related transaction costs of approx. EUR 7 million as items affecting comparability (IAC) in continuing operations Q4 2019 result.
The transaction is subject to customary closing conditions, including the approval of competition authorities and completion of works council consultation procedures, and is expected to be completed latest during Q3 2020.
Sanoma Media Netherlands will be reported as discontinued operations in Sanoma’s 2019 financial statements. Sanoma’s continuing operations consist of Sanoma Learning and Sanoma Media Finland.
Redefined Outlook for 2019 including continuing operations only
As a result of Media Netherlands classified as discontinued business, Sanoma redefines its Outlook for 2019.
Redefined Outlook for 2019 including continuing operations only:
In 2019, Sanoma expects that the Group’s continuing operations’ comparable net sales will be in line with 2018 and operational EBIT margin excluding PPA will be around 15%.
Previous Outlook including continuing and discontinued operations (as updated on 13 September 2019):
In 2019, Sanoma expects that the Group’s comparable net sales will be in line with 2018 and operational EBIT margin excluding PPA will be above 15% (2018: 15.7%).
The outlook is based on an assumption of the consumer confidence and advertising market development in Finland and in the Netherlands to be in line with 2018.
Sanoma’s strategic focus going forward – long-term financial targets remain unchanged
Divestment of Media Netherlands is an important step in Sanoma’s strategic transformation from a predominantly media company into a combination of a growing European-based learning company and the leading cross-media company in Finland. The divestment of Media Netherlands provides approx. EUR 400 million headroom for M&A. The headroom enables Sanoma to capture growth opportunities with a focus especially on the learning business.
Sanoma Learning is a growing European-based education company supporting learning and teaching in primary, secondary and vocational education (K12) through a portfolio of blended learning solutions, platforms and educational services. Its mission is to make a positive impact on learning by enabling teachers and schools to help all students to reach their full potential. It has an ambition to grow by using its scale and capabilities in learning design, education technology and educational services both in the existing and in new markets.
Sanoma Media Finland is the leading cross-media company in Finland. Its mission is to provide domestic, independent media for generations to come. It has an ambition to further strengthen its business and improve its profitability within the strategic focus areas: news and feature, entertainment and B2B marketing solutions.
Sanoma’s long-term financial targets remain unchanged and dividend for 2019 will be determined based on free cash flow from continuing and discontinued operations:
- Dividend policy: Growing dividend, 40-60% of free cash flow
- Net debt / Adj. EBITDA below 2.5
- Equity ratio 35-45%
In its Analyst and Investor Update on 18 December 2019 in Helsinki, Sanoma will provide more information about its strategy after the divestment of Sanoma Media Netherlands. More information on the event: www.sanoma.com/investors and email@example.com.
News conference for analysts and investors
A news conference for analysts and investors will be held in English by the President and CEO Susan Duinhoven and CFO and COO Markus Holm today at 11:00 EET at Sanomatalo, Töölönlahdenkatu 2, Helsinki. A live webcast of the conference can be followed via www.sanoma.com/investors. To ask questions, please dial one of the following numbers prior to the conference start:
Finland: +358 9 8171 0310
Sweden: +46 856 642 651
United States: +1 855 857 0686
United Kingdom: +44 33 33 000 804
PIN code for the call is 71708218#.
The presentation material will be available at www.sanoma.com/investors when the news conference starts, and an on-demand replay of the webcast shortly after the end of the conference.