Euromoney (LSE:ERM) shares gained in early Monday morning trade. The stock has outperformed the index in recent months, and was up 7% over the last month prior to Monday’s gains.
Euromoney is a UK business-to-business information company, which publishes a flagship English-language monthly magazine focused on business and finance. The firm also sells subscriptions, events to financial professionals.
Why did Euromoney shares take off?
Shares in the B2B firm shot up this morning after the company said it was in talks over a potential takeover. Management said it has received a number of approaches from a consortium comprising private equity company Astorg Asset Management S.ar.l and Epiris LLP, looking to take Euromoney private.
The latest offer of £14.61 a share is a 34% premium to the company’s closing price of £10.94 on Friday.
The consortium had previously made a number of offers for the company, valuing Euromoney at £11.75, £12.50, £13.10 and £13.50 per share.
Under the UK’s Takeover Panel rules, Euromoney has until 18 July to either accept a formal offer, or walk away. Euromoney’s management has warned there is no certainty a deal would be struck.
One to buy?
Euromoney shares traded for around £13.58 on Monday morning, rising 25% from Friday’s closing price. So the current price is still less than the most recent £14.61 offer.
However, as there is no guarantee that the deal would go through and If none can be agreed, the Euromoney share price would likely slump. However, the current price does factor in some of the risk that the deal might not go through.
Euromoney looked pretty expensive, even prior to the share price surging on Monday. In fact, it had a price-to-earnings ratio of 93.
However, pre-tax profits were hit massively during the pandemic. The firm made £106m in pre-tax profit in 2018, and this fell to £26m last year.
In its last half-year report, the firm said 73% of group revenue was generated from subscriptions as Euromoney announced a restructuring of its conferencing business during the pandemic.
It’s clear that the company’s events business struggled during the pandemic. Having worked in the industry, I’m aware how thin the margins are in this sector.
Meanwhile, Euromoney also highlighted that it would review its property requirements with its 2,500-strong workforce now working from home. This could make the business a lot leaner in future.
So I don’t think I’ll be adding this stock to my portfolio. There’s obviously risk the proposed deal might not take place. In which case, the share price would plunge.
And, in the long run, I’m concerned about any company operating in the events space. Margins are thin at the best of times, and inflation might exacerbate Covid-related challenges.
They’re also heavily reliant on graduates, and with the labour market so tight, I think grads have got better places to work. I also don’t think virtual events will ever be able to deliver quite the level of the revenues that physical conferences can.
