Smart Planet wasn't included in the $172 sale of ZD Edu; ZD target is $24
Excerpts from ML Research 11/17/99
Investment Highlights:
ú ZD announced today the sale of its ZD
Education unit, which targets corporations
and governments, to an equity fund managed
by Wasserstein Perella for $172MM in cash.
Proceeds will be used to reduce debt.
ú SmartPlanet, ZD?s recently launched online
consumer education unit, is not included in the
sale.
ú According to management, the deal is being
done at about 3X trailing revenues and over
30X EBITDA, a multiple that we believe is
quite attractive.
ú We believe the company is on track to
complete the examination of its strategic
options before yearend.
ú We estimate that ZD is worth $20/sh to $24/sh
in the private market based on the public
market valuation of ZDNet (ZDZ Not Rated
$20 5/8) and 9-11X ?00E EBITDA for the
publishing/events units.
Fundamental Highlights:
ú ZD Education posted $46MM in revenues for
the first nine months of this year.
What Has Changed?
ZD announced today the sale of its ZD Education unit,
which provides IT training to the corporate and
government markets, to U.S. Equity Partners, LP, an
equity fund managed by Wasserstein Perella. We believe
ZD will realize most of the $172MM purchase price after
taxes and the net proceeds will be used to reduce debt.
The transaction should close in the first quarter of 2000.
SmartPlanet, ZD?s recently launched online consumer
education unit, is not included in the sale.
ZD Education posted $46MM in revenues for the first nine
months of this year while SmartPlanet generated $2MM.
SmartPlanet is expected to ramp up very quickly after its
recent relaunch. According to management, the deal is
being done at about 3X trailing revenues and over 30X
EBITDA. Stripping out the newsletter/journal business,
which is in decline, the multiple is closer to 4X revenues.
It is difficult to find a good comparable for ZD Education.
SmartForce (SMTF D-2-1-9 $23 1/8), a company that is in
the transition to become a fully integrated e-learning
solutions, has been mentioned as a comparable. We
believe SmartForce is trading at about 6-7X ML Education
analyst?s 1999E revenue estimate of $195MM. Given the
size of ZD Education, we believe the multiple fetched is
quite attractive. |
