Events Fuel Growth at Advanstar and VNU

Growing conferences and tradeshows fueled revenue gains last year for both Advanstar Communications and VNU. But while questions about Advanstar's future are settled by its being taken off the market, VNU remains awash in the uncertainty of shareholder opposition to a recent buyout bid.

After selling off five divisions, shuttering five offices, eliminating 116 personnel and making five acquisitions last year, Advanstar is now focusing on revenue and earnings growth for the events, magazines and Web sites in its fashion, life sciences and power sports sectors.

"We expect to maintain our positive momentum in 2006 as we continue to expand our business," CEO Joe Loggia told analysts during the company's conference call.

The restructuring enabled the company to turn a profit. Advanstar's $8.6 million in 2005 net income compared with a $51.2 million net loss for 2004.

Year over year, revenue from shows and conferences was up 14 percent, compared with a 24-percent sales gain for direct marketing products and flat revenue for magazines.

Meanwhile, VNU, parent of VNU Expositions, generated 2005 earnings per share of $1.19 on revenue of $4.2 billion. Overall revenue was up 4 percent year over year, but up 10 percent for the expositions group.

Outgoing CEO Rob van den Bergh lauded the performance of the tradeshow unit — which, with about 50 exhibitions, supplies 80 percent of the business information division's profit — but cautioned that it would be difficult to repeat this year.

Good or bad, the company's financial performance was overshadowed by a private-equity consortium's offer to buy VNU for $9 billion, which amounted to a multiple of 13.4 times 2005 operating cash flow.

CFO Rob Ruijter told analysts and investors that the bid fairly valued the company and represented the best option and quickest shareholder return. VNU's executive and supervisory boards also considered breaking up or reengineering the company, but instead chose the option of selling the whole company.

Dividing the company up for sale, according to VNU management, would result in a loss of scale, adverse tax implications, negative customer reaction and prolonged distraction to employees and management.

But major shareholders oppose the consortium's bid, believing that the company would be worth more if its divisions were sold separately. New York-based Knight Vinke Asset Management has suggested instead that VNU restructure its media information division and sell the media measurement and business information divisions.

Despite the opposition, van den Bergh said the boards would continue to support the current buyout bid. "We feel we have a good case to defend, and we will do that," he said.

AlpInvest Partners, Blackstone Group, Carlyle Group, Hellman & Friedman, Kohlberg Kravis Roberts and Thomas H. Lee are members of the private-equity consortium.

The consortium approached VNU management last December as VNU's $7 billion bid to buy IMS Health was collapsing. According to VNU management, the financial advisers it hired agreed that the consortium's offer was fair.

Meanwhile, VNU executives are pushing to strip nearly $150 million in annual costs from the business by integrating administrative functions, streamlining operations and cutting costs. "I'm confident we will reach the targets, although it will be a lot of hard work," Ruijter said.

VNU Expositions launched 10 new tradeshows in 2005. Advanstar, meanwhile, launched 18 new pharmaceutical conferences, in addition to two new magazines.

Advanstar officials are planning New East Coast fashion events and new life sciences magazines, conferences and online initiatives for this year. Altogether, the company this year hopes to launch 12 magazines, 24 conferences and tradeshows, and 45 webinars in its three industry sectors.