The Financial Times published a story about German media giant Bertelsmann teaming with two banks to launch a private equity fund, which in turn might make a bid for Thomson Corp.'s textbook business.
Although the FT connects the two developments, it is unclear whether that is accurate. After all, the Bertelsmann venture with Morgan Stanley and Citigroup will be capitalized with €1 billion ($1.3 billion) — €500 million from Bertelsmann, and €250 million each from the PE arms of the two banks. Bertelsmann expects to invest about €150 million ($200 million) a deal.
It's unlikely that €1 of equity would be enough to pull off a buyout of Thomson Learning, which is reportedly worth something on the order of €5 billion. And even if a buyout could be leveraged 5:1, it’s unlikely that Bertelsmann, Morgan Stanley and Citi would commit all their equity to one deal.
Of course, Bertelsmann's new fund could make a pitch for a piece of Thomson Learning. According to The Deal's Auction Block database, all of Thomson Learning is valued at around $6 billion, but it is composed of multiple pieces: Education Direct and K.G. Saur and another unit, Peterson's, which collectively have $145 million in annual revenue; Thomson Medical Education, which had $97 million in 2005 revenue; and IOB reported $39 million. If sold in pieces, all are expected to fetch about 8.5 times EBITDA. —Matthew Wurtzel
See story from The Financial Times
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