Centaur Communications, publisher of Marketing Week, is to be floated on AIM, the Alternative Investment Market, next week.
The floated company will be worth about £148m, representing what some in the City consider an aggressive valuation. However, the launch has been oversubscribed, with 40 institutional investors prepared to stump up funds of £134m, the maximum they can subscribe.
After the flotation, chairman and chief executive Graham Sherren will hold a stake of about five per cent in the company, renamed Centaur Holdings. In addition, long-term investor Griffin Land & Nurseries will take up more than four per cent. Previously, Sherren and Sherren family interests held about 14 per cent and Griffin about 35 per cent of Centaur.
Sherren will continue in the combined role of chairman and chief executive in the short term. However, by autumn 2006 at the latest, Centaur will appoint a new chief executive, and Sherren will become non-executive chairman. Internal candidates will be considered for the post.
“I want it to be an internal candidate, though we will have to look outside as well,” says Sherren.
Centaur – which owns eight weekly magazines, including Money Marketing, the Lawyer and New Media Age; 12 monthly magazines; plus fast-growing exhibition and conference divisions – is expected to concentrate on organic growth immediately after the flotation. The company, set up by Sherren in 1982 after the acquisition of Marketing Week and Creative Review, has built up a “communities strategy”, focusing on brand extension of titles into allied areas, such as conferences.
“If we could develop one new community every year, we would be doing very well,” says Sherren.
He points to the experience and length of service of many senior managers as an important element in Centaur’s success.
The flotation was triggered by the decision of one major shareholder, US investment bank Veronis Suhler Stevenson, to sell its 35 per cent investment in Centaur after it reached its term – the stake was taken up in 1998. Centaur is using a novel route to market, known as an “accelerated initial public offering” – pioneered in the UK by Center Parcs. This has involved broker and investment house Numis Securities buying Centaur for about £145m shortly before flotation.
The advantage of the accelerated IPO is speed, compared with the normal cumbersome and expensive process that has led to the City losing out against private and trade buyers.
In the 12 months to June 30, 2003, Centaur achieved pre-tax profits of £6.7m on turnover of £62m. Numis forecasts a similar pre-tax profit for 2004 and £11m in 2005. Commenting on the company’s prospective valuation, Sherren says: “It’s a good price, but only half of what we expect to achieve in the next two to three years. Now we must prove it.”