Understanding Thomson’s Disposal Of PRN

Adrian J Cotterill, Editor-in-Chief

Late on Friday we gave you the exclusive that ‘Now PRN Is Up For Sale’ and promised you that we would look at it in a little more detail.

Thomson Worldwide acquired PRN for approx USD 285 million (about 29x earnings) back in July 2005.

PRN at the time was doing about USD 100 million in sales although well over 80% of their revenues came from one customer, namely WalMart – and to be fair that hasn’t changed very much since (and it’s probably a mistake that it hasn’t).

For a while all that most people had to go on (in terms of Thomson disposals) was analyst supposition although late last week Thomson acknowledged that “it was ready to make divestitures to reduce debt”

In a statement accompanying the release of Thomson’s third quarter revenues, Frederic Rose, Thomson’s new CEO, pointed out also that “unprofitable business lines will be restructured or exited.” – this was the first time that management had been ready to acknowledge the necessity of such asset disposals.

These disposals are likely to be of very specific non-core businesses – likely candidates for sale are its 11.8% stake in Videocon Industries, it’s 50% stake in Screenvision (its cinema advertising subsidiary), Playout (a business that operates control rooms for TV channels such as France 25) and its retail telephony unit.

Thomson also distributes wireless or mobile phones that are sold under different brands such as GE or Alcatel and this is also a large enough business, with revenues on the order of EUR 300 million that may well be sold

We would expect Thomson to keep the DVD, set-top boxes and other technology businesses which we believe are deemed strategic.

PRN then is somewhat the victim of its parents cash crisis!

We said in our Friday post “What’s hard to believe ia that the asking price for PRN is higher than the current market cap of Thomson itself!” and it’s likely that Thomson will be talking to the likes of Clear Channel, News America, NBC/GE and Viacom to have any chance of that sort of deal happening.

We believe that PRN has approximately EUR 50 million in sales at the moment.

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