Sanoma Corporation, Inside Information, 11 February 2020 at 08:00 EET
Sanoma acquires Alma Media’s regional news media business and evaluates strategic options for its online classifieds’ business in Finland
Sanoma has signed an agreement to acquire Alma Media’s regional news media business in Finland. In 2019, net sales of the acquired business were EUR 99 million (FY 2018: 103) and pro forma adjusted EBITDA was EUR 15 million (FY 2018: 13) or approx. EUR 20 million (FY 2018: 18) including the impact of the delivery outsourcing agreement that came into effect on 1 January 2020. The acquisition is estimated to create annual net synergies of approx. EUR 13 million, which are expected to be realised in full in 2022. The agreed enterprise value of the acquired business is EUR 115 million, corresponding to a multiple of 5.8 (EV / Pro forma adjusted EBITDA including the impact of the delivery outsourcing agreement), and 3.5 including also synergies. The transaction is subject to approval by the Finnish Competition and Consumer Authority. In addition, Sanoma will evaluate strategic options for its online classifieds’ business in Finland.
The acquired business consists of Alma Media Kustannus Oy, publisher of leading regional newspapers Aamulehti and Satakunnan Kansa, as well as thirteen regional newspapers in Tampere region, Western Finland and Central Finland. It also includes Alma Manu Oy, provider of printing services with a state-of-the-art printing facility in Tampere.
Total number of subscriptions of the acquired titles was 190,000 at the end of 2019. Approx. 14% of the subscriptions were digital-only, compared to 27% for Sanoma’s Helsingin Sanomat. The acquired business is complementary to Sanoma’s current news media offering.
In the beginning of 2020, the acquired business had approx. 365 employees (FTE). The employees will become employees of Sanoma Group after the closing of the acquisition.
Strategic rationale of the acquisition: Growth in digital news subscription base
This highly synergistic bolt-on acquisition is an important investment in the growth of Sanoma’s digital subscription base, and in the sustainable future of independent domestic journalism in Finland. It allows investments in digital news media products, thus accelerating growth in digital subscription base and attracting younger audiences. The acquisition strengthens Sanoma Media Finland in one of its strategic core businesses, news & feature, and supports its long-term financial target of 12-14% operational EBIT margin excl. PPA.
The acquisition creates a portfolio of independent and successful brands with their own Editors-In-Chief ensuring continued diversity of the media landscape in Finland. The acquired business complements Sanoma’s existing newsmedia business; Alma Media’s strong regional content on one hand, and national, international and feature content by Sanoma on the other. The acquisition increases efficiency in shared operations and support functions, which enables investments in digital development.
“I am happy and honored to welcome the great teams and Alma Media’s strong regional newsbrands with even more than 140 years of successful history to Sanoma. Journalism and news media are central to Sanoma’s media business and its history, giving us a logical role and responsibility in securing its vitality for future generations. Growing our news subscription base is important for all titles as success in the digital era requires scale, and we believe this transaction will equally benefit all readers, advertisers, employees as well as our shareholders. The benefits of consolidation in the news media industry can already be seen in many other European countries, such as Sweden, Denmark, Belgium and the Netherlands, while the diversity of the media landscape is maintained”, says Susan Duinhoven, President and CEO of Sanoma.
“Alma Media’s regional titles have strong brands and customer base in their regions and are complementary to our news media offering. Building on their heritage and regional relationships, we believe our recent learnings and successes in Helsingin Sanomat can accelerate our combined digital usage and development, and increase attractiveness especially for the younger audiences across the regions. By sharing resources and best practices, we can jointly develop even more engaging digital propositions for the readers and at the same time strengthen the printed newspapers, which continue to have a significant role in the news consumption”, adds Pia Kalsta, CEO of Sanoma Media Finland.
Key financials of the acquired business
Adjusted key figures of the acquired business (pro forma)
|EUR million||FY 2019||FY 2018||FY 2019 incl. delivery outsourcing impact *||FY 2018 incl. delivery outsourcing impact *|
|Cash flow from operations||13||9||18||14|
* Including annual cost savings and the corresponding reduction in net sales of approx. EUR 5 million related to the delivery outsourcing agreement that came into effect on 1 January 2020 (as communicated by Alma Media on 20 June 2019 and 31 December 2019).
Value of the acquired assets in the seller’s balance sheet was EUR 84 million at the end of 2019, of which liabilities represent EUR 73 million, including EUR 41 million of mostly leased printing assets. After the closing of the acquisition, which is expected during 2020, Sanoma will have a network of three printing facilities – Vantaa, Varkaus and Tampere – with up-to-date printing facilities covering a large part of Southern Finland. These facilities will continue to serve Alma Media and other external printing service customers.
Purchase price and financing of the acquisition
The agreed enterprise value of the acquired business is EUR 115 million, including EUR 42 million of net debt and advances received at the end of 2019. The enterprise value represents an EV / pro forma adjusted EBITDA multiple of 5.8 including the impact of the delivery outsourcing agreement, and 3.5 including also synergies. The transaction agreement also includes an additional purchase price mechanism, which is based on advertising and printing sales and is expected to have a non-material impact on final purchase price. The purchase price will be payable in cash and Sanoma will finance the acquisition by using its existing debt facilities.
Sanoma estimates that, on top of the approx. EUR 5 million cost savings related to the delivery outsourcing agreement that came into effect on 1 January 2020, the acquisition will create net annual synergies of approx. EUR 13 million. These synergies are expected to be realised in full in 2022 and mainly relate to operational efficiency, procurement and IT, as well as shared operations and support functions.
Sanoma will book approx. EUR 6 million of transaction and integration costs as items affecting comparability (IACs) in Sanoma Media Finland’s 2020 result.
The transaction is subject to customary closing conditions, including approval by the Finnish Competition and Consumer Authority, and is expected to be finalised during 2020. After closing, the acquired business will be reported as part of Sanoma Media Finland SBU.
Evaluation of strategic options for Sanoma’s online classifieds’ business
In-line with Sanoma Media Finland’s strategic focus on three core businesses, news & feature, entertainment and B2B marketing solutions, Sanoma will evaluate strategic options for Oikotie Ltd., a leading online classifieds player in Finland. During the past years Oikotie has successfully grown its net sales, and its solid profitability improvement continued in 2019. Divestment of the business could be one of the potential outcomes of the evaluation.
Oikotie Ltd. consists of the leading Finnish online classifieds sites in recruiting and housing, as well as sites focused on construction and renovation (rakentaja.fi) and electricity comparison (sähkövertailu.fi). Pro forma 2019, net sales of Oikotie Ltd. grew to EUR 26 million (pro forma 2018: 24) and operational EBITDA improved to EUR 10 million (pro forma 2018: 9). Oikotie Ltd. had 94 employees (FTE) at the end of December 2019.
Sanoma will release further information, as required under the applicable rules, as soon as the evaluation is completed.
News conference for analysts and investors
Sanoma will, together with Alma Media, host a news conference for analysts and investors in English today, 11 February at 12:30 EET at Sanomatalo, Töölönlahdenkatu 2, Helsinki. Sanoma’s President and CEO Susan Duinhoven and Alma Media’s President and CEO Kai Telanne will present the transaction. A live webcast of the conference can be followed via www.sanoma.com/investors. For investors and analysts there is an opportunity to ask questions, please dial-in one of the following numbers prior to the conference start:
Finland +358 9 8171 0310
Sweden +46 8 5664 2651
United Kingdom +44 333 300 0804
United States +1 855 857 0686
PIN code for the call is 92759113#
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.
News conference for media
Sanoma will, together with Alma Media, host a news conference for media in English today, 11 February at 14:30 EET at Sanomatalo, Töölönlahdenkatu 2, Helsinki. Sanoma’s President and CEO Susan Duinhoven and Alma Media’s President and CEO Kai Telanne will present the transaction.
Kaisa Uurasmaa, Head of Investor Relations and CSR, Sanoma Corporation tel. +358 40 560 5601
Hanna Johde, Communications Director, Sanoma Media Finland, tel. +358 40 673 8977
Sanoma is a front running learning and media company impacting the lives of millions every day. We enable teachers to excel at developing the talents of every child, provide consumers with engaging content, and offer unique marketing solutions to business partners.
Today, we operate in ten countries including Finland, the Netherlands and Poland. Our net sales totalled EUR 900 million and we employed approx. 3,500 professionals in 2019. Sanoma shares are listed on Nasdaq Helsinki. More information is available at www.sanoma.com.