Media company Talentum backs out of agreement to buy state-owned Edita

Edita found to be in worse shape than Talentum thought when deal was signed

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The media company Talentum, which is part of the Alma Media Group, decided on Friday to back out of its planned purchase of the state-owned publishing company Edita.
      The unexpected turn of events took place about a month after Talentum had announced that it was buying out Edita, which would have made it one of Finland's largest players in the media market.
      "We have negotiated with the state on reassessing the terms of the purchase. As no mutually satisfactory solution has been found, it is better that the deal should fall through", said Talentum CEO Harri Roschier.
      Edita was disappointed by the development.
      Edita CEO Mikko Suotsalo called the situation unfortunate. Edita's head shop steward Rony Sahalan called the decision very bad "for the company and for the employees".
     
Roschier said that the deal foundered on the fact that inspections implemented after the preliminary agreement had been reached revealed new information on the value of Edita. He did not want to go into further detail, but said that the surprises were linked with "economic prospects for the near future."
      "Edita is in worse shape than we thought when we made the preliminary agreement", Roschier says.
      When the original deal was announced with much fanfare shortly before Christmas, Talentum offered about EUR 46 million for Edita, of which the state would have received EUR 16 million in cash, and the rest in Talentum shares. The state would have received a 20% holding in Talentum, as well as a seat on the company's board.
     
Edita's Suotsalo denies that Edita had held back any important information.
      "At least the operational management has given all of the information that has been requested."
      He also pointed out that Talentum and Edita share the same auditor, which means that there should not have been any grounds for misunderstanding.
      Jarmo Väisänen of the Ministry of Finance says that the deal foundered on "differing views on the value of various entities".
      The state does not plan to take action over the cancellation of the deal, and is continuing as the owner of Edita.
      Väisänen says that fresh advance information about last year's result looks good.
      "Trading profit doubled compared with 2003, and 40% growth is expected for this year. It makes it possible to develop the company."
     
Talentum had hoped that it might grow as a result of the deal. CEO Roschier says that he has not yet had time to draft a new growth plan. He also does not rule out the possibility of going back to buying Edita.
      While the turn of events was bad news for Edita, financial markets were not sorry to see the plan founder; in Friday afternoon's trading Talentum's share price rose 3.6%.
      Rami Vehmas, an analyst at Opstock, says that the collapse of the deal was a good thing from the point of view of Talentum's shareholders. "The price offered by Talentum - 46 million euros - was very high, considering the 58 million euros in total net debt that the Edita deal would have brought with it."
      Vehmas says that even without Edita, the growth prospects for Talentum "remain modest".


Previously in HS International Edition:
  State to sell Edita publishing house to Alma Media company Talentum (23.12.2004)

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