From: William Packer <[log in to unmask]>
Date: Thu, Jan 15, 2015 at 10:18 AM
Subject: Nature and Springer Science to merge - implications for our
coverage

Good afternoon,

Please find below a short comment on the implications for our coverage
following the announcement of the Nature / Springer Science merger.

*Nature and Springer Science to merge - implications for our coverage (INF
& REL)*


Springer Science (PE owned - BC Partners) and Nature (owned by private
Holtzbrinck group) have announced a merger. Springer CEO Derk Hank will act
as CEO of the new group and BC owners will own 47% of the share capital
(Holtxbrinck 53%). The players are two of the largest scientific publishers
and in our view the merger will create significant cost synergies and make
their journal collection more 'must have' for university libraries.
Nature's smaller, (very) high quality journal portfolio will complement
Springer's wider, lower impact factor portfolio. No valuation multiples or
synergy numbers have been communicated. BC Partners MD said an IPO was
their most likely exit, likely in 2-3 years time.


We see a number of implications for our coverage - we expect no major share
price reaction.


*Informa (+) - *a takeout of Informa's Taylor & Francis division (c40%
group EBITA) is less likely in the shorter term as the two companies
combine. Springer and Informa have previously almost combined (2006, 2009).
However, in our view, the merger once again underlines Informa's strategic
value in a consolidating industry. We note that Springer Nature will remain
signficiantly smaller than Elsevier, the market leader, and therefore an
eventual acquisition of Taylor & Francis as the next phase of consolidation
is a possibility. We expect a broadly neutral share price rection. Informa
bears may spin the M&A as a negative for their pricing power although we
note that Informa has typically outperformed its larger peers in terms of
top line growth. In our view, its smaller market share allows for greater
price increases (when accompanied by strong article volume growth), albeit
leaving it more exposed to being cancelled at times of budget pressure
(although T&F grew over the financial crisis like peers).


*Reed Elsevie**r (-) *- we see a limited impact for Elsevier (c50% group
EBITA). Elsevier remains market leader and 'must have' for clients,
although its sheer size (c1/3 content budget for typical library) limits
price increases somewhat. Despite the merger, Elsevier remains the dominant
player in the industry limiting their opportunity to partake in
consolidation.


*Academic publishing revenue (GBP in 2014) with proforma Springer Nature *

*Note: reported revenue by academic publishing (i.e includes non-journals
revenue) *


Regards
Will and Sami