VNU Gains Debt And Goes Private

Shareholders in Netherlands-based media and information conglomerate VNU approved its conversion into a private limited liability corporation at an extraordinary general meeting in Haarlem July 28th. The name of the company was changed to VNU Group B.V. and a new board seated.

The group’s holdings include market information giants ACNielsen, Nielsen SoundScan, and Nielsen BDS as well as trade publications The Hollywood Reporter and Billboard.

VNU was taken over by a group of private investors in May, after a months-long clash between shareholders and the company’s management board.

A restructuring in July, as reported by Media Post, caused the group to take on significant new debt to finance its recent $9.7 billion buyout by a consortium of private equity firms including Kohlberg Kravis Roberts & Co. (KKR), the world’s largest private equity group.

Bloomberg reports the debt is rated Caa1 by Moody’s, which is seven levels below investment grade, and CCC+ by Standard & Poor’s.

However, European junk bond investors are making it more expensive for companies to pile on debt, according to Bloomberg.

VNU was forced to offer higher yields to generate investor interest in $1.67 billion worth of bonds backing its leveraged buyout, as well as boost yields on the bank debt in the deal.

Fitch Ratings told Bloomberg that KKR and VNU’s other investor firms are reportedly sticking the conglom with debt that is nine times earnings – said to be a record for any leveraged buyout.

Included in VNU’s debt is its acquisition, announced July 6th, of influential music industry trade Radio & Records. It is now in the process of folding Billboard Radio Monitor into it and consolidating offices and operations, resulting in a round of 26 employee layoffs August 7th.

The company’s saga began in November, when a group of mostly U.S. institutional shareholders blocked VNU from carrying out a $6.8 billion bid to buy IMS Health Inc.

Shareholder activism is rare in the Netherlands and it was a startling rebuff for former VNU CEO Rob van den Bergh, who promised to resign in November but held on to his job until he was replaced in June at VNU’s final board meeting as a public company.

CFO Rob Ruijter was named interim CEO. Robert L. Krakoff, a longtime media and publishing exec, becomes president and CEO of VNU Business Media USA, replacing Michael Marchesano, who was named VNU executive VP and chief transformational officer.

Shareholders rejected one buyout offer in March, but eventually tendered their shares in May after the buyers sweetened the bid to $37.15 per share or $9.7 billion.

The buying consortium comprises AlpInvest Partners, The Blackstone Group, The Carlyle Group, Hellman & Friedman LLC, Thomas H. Lee Partners and KKR.