Springer shakes up STM

<p>Tom Holman</p><p>Buyout specialists Candover and Cinven have transformed the landscape of scientific and academic publishing with the purchase of German giant BertelsmannSpringer.</p><p>The acquisition leaves Candover and Cinven joint owners of the world's second-biggest academic publishing entity, behind Reed Elsevier. BertelsmannSpringer will be paired with Kluwer Academic Publishers (KAP) to create Springer, a new STM powerhouse with combined turnover of about &#8364;880m (&#163;628m). </p><p>The two publishers have a shared roster of 1,400 journals and publish about 5,000 new books a year. Candover and Cinven had paid &#8364;600m (&#163;428m) to pick up KAP from its Dutch parent, Wolters Kluwer, last October. </p><p>Springer will use an internet platform as the hub of the new publisher by combining the digitised material of both businesses. The move ratchets up the pressure on other STM and academic publishers to invest in online delivery of their content. BertelsmannSpringer and KAP already have advanced digital delivery models, and the combined platform could rival Reed Elsevier's online science portal, ScienceDirect.</p><p>Candover and Cinven plan a heavy joint investment to digitise more material and integrate the two publishers, a process they hope to complete within two years.</p><p>Simon Leefe, director of Candover, and Brian Linden, director of Cinven, said they were pleased with the close fit of BertelsmannSpringer and KAP and claimed the new company would improve services to the academic community. The company aims to outpace the STM publishing market's current annual growth rate of about 4%.</p><p>The deal was immediately followed by speculation about the long-term plans of the buyers. Mr Leefe and Mr Linden hinted that a flotation of Springer could quickly follow integration. An onward sale is unlikely. "The business has many of the attributes that the markets are looking for--flotation is a realistic target," Mr Leefe said.</p><p>The &#8364;1.05 bn (&#163;750m) paid for BertelsmannSpringer by Candover and Cinven is thought to be fractionally higher than Bertelsmann's expectations. It values the academic publisher at about 1.37 times sales. BertelsmannSpringer is Germany's largest publisher by value of sales, according to a Buchreport ranking, and made a profit of &#8364;71m (&#163;51m) on sales of &#8364;731m (&#163;522m) in the year to end-December 2002.</p><p>The takeover ends a three-month auction and comes almost a year after the business was first put up for sale. Candover and Cinven saw off two other offers led by rival STM publisher Taylor&amp;Francis and former Springer c.e.o. Jurgen Richter, each backed by venture capital firms. </p><p>The three final rivals were drawn from a field of 14 serious bidders in a competitive auction. Candover and Cinven's higher bid and security of working capital--the bid has been underwritten by Barclays Capital--made it the preferred purchaser.</p><p>The deal eases Bertelsmann's debt of about &#8364;2.7bn (&#163;1.9bn) and frees it to concentrate on trade books, television and music. Bertelsmann c.e.o. Siegfried Luther said the transaction would enhance its financial flexibility. The 5,000 staff of BertelsmannSpringer are thought to have favoured Mr Richter's bid, fearing a break-up of the business by Candover and Cinven.</p><p>The creation of Springer has ripple effects for other STM heavyweights including Taylor&amp;Francis, whose growth strategy has been based on acquisitions. Pressure on T&F's share price was eased earlier this year when it picked up the US-based CRC Press for &#163;60m. Consolidation in the sector could also affect Blackwell Publishing, for which T&F last year bid &#163;300m, or 1.37 times its 2002 sales--a ratio that matches exactly the valuation of BertelsmannSpringer.</p><p>The takeover of BertelsmannSpringer is subject to clearance from competition authorities. The deal does not include its activities in France, which account for about 4.5% of total turnover. Candover and Cinven are negotiating issues surrounding the French business, a takeover of which requires clearance from the country's authorities.</p><p>tom.holman@bookseller.co.uk</p>