Chances are you haven't heard of Netherlands-based VNU NV. However, the company owns well-known U.S. brands, including the A.C. Nielsen TV ratings service, Billboard magazine, and the Hollywood Reporter.
VNU deepened its U.S. presence yesterday, announcing its $6.9 billion proposed purchase of IMS Health Inc. (NYSE:RX). The deal includes 40% cash, with the rest in VNU equity. VNU will use this deal to get an ADR listing on the New York Stock Exchange while maintaining its listing on the Euronext Amsterdam.
Founded in 1954, IMS is now a leader in databases, software analytics and consulting for the health care industry. The company helps clients with disease management, product launches, sales force effectiveness, optimal product mix, and brand management. However, its key business is tracking pharmaceutical sales, including 90% of all U.S. transactions.
VNU used an ominous phrase to explain the deal: "significant synergy opportunities." With its databases, software analytics and consulting, VNU is similar to IMS. Now it can add IMS' health care data to its current focus on consumer packaged goods and media.
Over the past year, VNU's consumer and media segments have grown sluggishly. With health care growing at a rapid clip, adding IMS is an attractive prospect. Getting listed on the NYSE will also give VNU greater liquidity, which may translate into a higher stock price.
VNU made a detailed presentation of its vision, even providing examples of its anticipated synergies. Suppose a pharmaceutical company launches a new chronic care drug. VNU's consumer-packages segment can measure its effectiveness on the patient side, gauging factors such as product perceptions, forecasting acceptance, and pricing sensitivity. Meanwhile, IMS will examine reimbursement strategy, product efficacy, and pricing on the physician side. Within three years, the company expects to achieve revenue and cost synergies of $150 million and $100 million, respectively.
Melding two different businesses is never easy, especially with complex organizations like these. Both companies will need to deal with the cross-cultural differences that accompany international deals.
This purchase looks good on paper (or, in this case, in PowerPoint presentations). That said, investors shouldn't expect immediate results.
A healthy dose of related Foolishness:
- Omnicare's Expensive Courtship
- UnitedHealth Swallows PacifiCare
- Riding the Bumpy Health-Care Megatrend
At the time of publication, Fool contributor Tom Taulli owned no financial position in any company mentioned in this article.
