Will Increase Its Ownership of Factiva from 50% to 100%
Transaction Expected to Be Accretive in 2007
NEW YORK, Oct. 18, 2006 (PRIMEZONE) -- Dow Jones & Company (NYSE:DJ) today announced it has signed a definitive agreement to acquire Reuters' 50% interest in Factiva, bringing Dow Jones ownership of Factiva to 100%. Completion of the transaction is subject to regulatory approvals and other customary closing conditions and is expected to occur by year end 2006.
"Owning 100% of Factiva will accelerate the pursuit of our mission, which is to be the world's best publisher of high quality, indispensable and conveniently accessible business and related content across all media channels," said Rich Zannino, chief executive officer of Dow Jones. "The acquisition will nearly double the size of our Enterprise Media Group. Together with the previously announced sale of up to six of our community newspapers, this reflects our determination to reduce our reliance on print publishing and to deploy our capital to the highest-returning investments for our shareholders as opportunities arise."
Mr. Zannino continued, "Reuters has been a very good partner, and since 1999 the Factiva joint venture has created much value for the customers and shareholders of Dow Jones and Reuters. The time is now right for Factiva to have one owner. Strategically and operationally, Factiva fits our Enterprise Media Group like a glove, creating significant synergies which result in a compelling financial return to Dow Jones while enabling us to pay an attractive price to Reuters. Our execution risk is low, as Factiva will be integrated into our Enterprise Media Group, which is run by Clare Hart, who served as Factiva's CEO from 2000 until her appointment as president, Dow Jones' Enterprise Media Group in February 2006. On behalf of my colleagues at Dow Jones, we look forward to welcoming the many talented employees of Factiva to the Dow Jones family."
Factiva Transaction
Dow Jones will pay a $160 million purchase price at closing reflecting approximately $153 million in cash plus $7 million in preferred stock issued by Factiva, subject to a working capital adjustment. In addition, Dow Jones will make annual payments over the next 3.5 years under a variety of agreements with an estimated value of about $25 million. Dow Jones will generate a tax benefit related to a step-up in the basis of Factiva's assets with a present value of about $25 million. The cash portion of the purchase price will be funded with proceeds from the sale of up to six Ottaway local media properties.
In 2006, Factiva is estimated to generate revenue of approximately $290 million and recurring EBITDA of $27 million. On a pro-forma basis, after taking into account the elimination of certain payments which will no longer be paid by Factiva to Reuters plus cost synergies from the integration of Factiva with Dow Jones Enterprise Media Group, Factiva is estimated to generate about $290 million in pro-forma revenue and about $50 million of pro-forma EBITDA, incrementally to Dow Jones. The Company expects to incur integration costs in 2006 which will dilute 2006 earnings by about 3 cents per share. In 2007, the Company expects the transaction to increase earnings by about 3 to 5 cents per share after about 2 cents of additional integration costs.
Currently, Dow Jones reports its 50% ownership of Factiva as an equity investment, recording its 50% share of Factiva's profit as equity income. After the acquisition, Dow Jones will include 100% of Factiva's revenue, expense, EBITDA and operating income, thereby significantly increasing its consolidated financial results. Using 2006 pro-forma data (including cost synergies), revenue would increase by $290 million, EBITDA by $50 million, and operating income by $32 million.
Today, Factiva is the number one provider of global business content, research products and services to global enterprises mainly in the finance, corporate, professional services and government sectors. Factiva has 1.6 million paying subscribers. It is headquartered in New York, N.Y., and has substantial business operations in Princeton, N.J., where it shares offices with Dow Jones. With approximately 750 employees across 33 locations worldwide, Factiva combines news and information from more than 10,000 sources in its technology-enabled, conveniently accessible, subscription-based offerings. Factiva was founded in 1999 as a 50/50 joint venture between Dow Jones and Reuters to combine and leverage the enterprise-facing, data retrieval, archival and current awareness businesses of Dow Jones in North America and Reuters in Europe and Asia.
Strategically, acquiring 100% ownership of Factiva will further Dow Jones' vision to be the world's best provider of high-quality, indispensable and conveniently accessible business and related content across all media channels, consistently generating superior value to all its customers and shareholders. The acquisition will remove certain joint venture conditions that limit Factiva's business opportunities in its core enterprise market. Removing these restrictions will allow Factiva to develop applications with Dow Jones Newswires and Dow Jones Licensing Services that better target the financial-services market. At the same time, Dow Jones Newswires and Licensing Services will better serve their customers by being able to offer a full suite of end-to-end information solutions. Finally, the Dow Jones Consumer Media Group will be able to leverage Factiva's sophisticated enterprise-facing search capabilities to develop business search products targeting the consumer market.
Community Newspaper Transaction
As previously disclosed, Dow Jones is marketing six Ottaway community newspapers. Proceeds of sales would be used to finance the Factiva purchase and pay down debt. Dow Jones is evaluating options for Ottaway newspapers in six markets: Danbury, Conn.; Oneonta and Plattsburgh, N.Y.; Santa Cruz, Calif.; Sunbury, Pa.; and Traverse City, Mich. These options include cash sales and/or exchanges for other community newspapers and are expected to close by year end 2006. Dow Jones has tax loss carry-forwards which it intends to use to offset federal taxes due on capital gains on these newspaper sales. The company will provide an update on financial implications of the sales when and if it enters a definitive agreement.
The pro-forma effect of the Factiva and Ottaway transactions will reduce the Company's reliance on print revenues from around 70% of Dow Jones revenue in 2006 to about 60% in 2007.
The Factiva transaction is subject to antitrust approvals and customary closing conditions. No assurance can be given that the proposed transaction will be consummated. While any transactions involving community newspapers are expected to be completed before year-end, no such assurances can be made. All estimates herein are based on the Company's analysis of information presently available. The Company will update this information as needed and upon completion of the transactions.
Evercore Group LLC served as financial advisor to Dow Jones & Company and Fried, Frank, Harris, Shriver & Jacobson LLP served as legal advisor.
About Dow Jones & Company
Dow Jones & Company (NYSE:DJ); (dowjones.com) publishes The Wall Street Journal and its international and online editions, Barron's and the Far Eastern Economic Review, Dow Jones Newswires, Dow Jones Indexes, MarketWatch and the Ottaway group of community newspapers. Dow Jones is co-owner with Reuters Group of Factiva and with Hearst of SmartMoney. Dow Jones also provides news content to CNBC and radio stations in the U.S.
The Dow Jones & Company logo is available at http://www.primezone.com/newsroom/prs/?pkgid=2636
Information Relating To Non-GAAP Reconciliation and Forward-Looking Statements
EBITDA - Use of Non-GAAP Measures:
EBITDA is widely used in the media industry as a measure in evaluating the market value of media properties. EBITDA is not a measure of performance under generally accepted accounting principles and should not be construed as a substitute for net income as a measure of performance, nor as a substitute of cash flow as a measure of liquidity.
Reconciliation of Factiva estimated 2006 Operating Income to
recurring EBITDA:
Estimated
(in millions) 2006
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Operating Income $ 12
Adjusted for:
Depreciation and amortization 10
Restructuring (principally employee severance) 3
One-time employee benefit costs 2
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Recurring EBITDA $ 27
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Reconciliation of Pro Forma Operating Income to Pro Forma EBITDA:
(in millions) Pro Forma(a)
----------
Pro Forma Operating Income $ 32
Adjusted for:
Depreciation and amortization 18
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Pro Forma EBITDA $ 50
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(a) Proforma includes annualized purchase synergies and takes into
account the elimination of certain payments which will no longer
be paid by Factiva to Reuters
This press release contains forward-looking statements, such as those including the words "believe," "expect," "intend," "estimate," "will," "plan" and similar expressions, that involve risks and uncertainties that could cause actual results to differ materially from those anticipated, including: the risk that the conditions to the acquisition are not met and the acquisition is not consummated; the possibility that the closing of the transaction is delayed and the potential adverse effect of such delay on Factiva's business; if the acquisition is consummated, the Company's ability to successfully integrate the acquired business into its Enterprise Media Group, and to achieve production and operational efficiencies and synergies in doing so; the risk that the Company will not realize expected opportunities to enhance its other products and services resulting from the acquisition of Factiva; changes in demand affecting Factiva's business; the competition Factiva's business faces from other news and information companies; the negative impact of business consolidations and layoffs in the industries to which Factiva sells its products on sales of Factiva's products; the risk that certain key employees may choose to leave in connection with the transaction; the risk that the contemplated sales of the Ottaway newspapers may not be consummated or may be delayed and that the Company may need to pursue alternative means of financing the acquisition; and such other risk factors as may be included from time to time in the Company's reports filed with the Securities and Exchange Commission and posted in the Investor Relations section of the Company's web site (www.dowjones.com). The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. This press release includes certain non-GAAP financial measures as defined under SEC rules. As required by SEC rules, we have attached to this press release a reconciliation of those measures to the most directly comparable GAAP measures.