Shareholders Push for Sale of Dun & Bradstreet
Dun & Bradstreet publishes the Moody's Investors Service for bond ratings and is a major provider of business-credit information to direct marketers and others. The business-information arm has been struggling, according to shareholders and analysts, and the company recently said it would not meet analysts' profit expectations for the year because of poor domestic results in its business-information division.
William Nygren, a partner at Harris Associates, which owns a 12.5 percent stake in Dun & Bradstreet, said recent acquisitions in the business-information sector suggest that the firm should be worth much more to the right partner than its current stock price indicates. He said other recent mergers, including the purchase of Nielsen Media by Dutch media conglomerate V.N.U., indicate that buyers are valuing business-information companies at about 15 times their pretax cash flow. Based on analysts' projections for Dun & Bradstreet's cash flow, the company should fetch a purchase price of about $60 per share, he said, more than double the $26 it was trading around last week.
"That leaves a great difference between what the public values the company at and what we would guess the private market would value the company at," he said. "We think the reason for that difference is a lack of confidence in the management of Dun & Bradstreet's business-information segment."
Nygren suggested that the current management of Dun & Bradstreet was incapable of correcting some of the basic "blocking and tackling issues" that have hindered the company's performance.
"I think the business could be jump-started by ownership from a larger company that already has better systems and strong sales-force motivation," he said, citing two key areas where Harris feels Dun & Bradstreet has struggled.
Other large Dun & Bradstreet investors last week were reported to be supportive of Harris' suggestions.
A Dun & Bradstreet spokesman declined to comment specifically on any of the investors' positions regarding a sale.
"Management and the board have an ongoing dialog regarding shareholder value issues, and will discuss Harris Associates' proposals at its next meeting," said William Doescher of Dun & Bradstreet. "We're taking it seriously."
Analysts said Harris' move has put pressure on the management and the board to seek a buyer.
"The stock is up [since the announcement of Harris' suggestion], so the market thinks the company should be sold," said James Dougherty, an analyst with Prudential Securities, New York. "So, if management doesn't think it should be sold, now it's beholden to management to explain why."
Some companies that might be interested in the purchase of Dun & Bradstreet, according to Dougherty, include publishing conglomerates Reed Elsevier of England and The Netherlands V.N.U., Thomson Corp. of Canada and Wolters Kluwer NV of the Netherlands.
Nygren of Harris Associates said Harris feels there are "many synergistic buyers" that might be able to turn the company around.
"That is why we are urging the company to retain an investment banking firm and take control of the sales process rather than sitting back and waiting for unsolicited bids to come in and responding to them one at a time," he said.
The call for Dun & Bradstreet to auction itself to the highest bidder follows a break-up of the company three years ago, when it spun off ACNielsen Corp. and Cognizant, which later split into IMS Health Inc. and Nielsen Media Research Inc. Last year, the company spun off publisher and printer R.H. Donnelley Corp.