Blackwell Publishing in Dynasty-Style Dispute
Posted On June 3, 2002
Blackwell Publishing is engulfed in a family feud fit for a Dynasty plot. In the latest twist to an increasingly embarrassing public row, shareholder meetings of both Blackwell Publishing and sister company Blackwell, Ltd. (the separate bookselling and distribution company) were recently canceled at the last minute, leaving the privately held U.K.-based academic journal and book publisher looking even more rudderless and adrift.
At the time of this writing, no one at Blackwell Publishing was prepared to talk to Information Today, but the dispute apparently follows last year's merger of Blackwell Publishers (which concentrated on the humanities) with Blackwell Science. Due to the resulting integration costs, the internal profit-related formula used to price the shares in Blackwell Science (which are not publicly listed) fell from $22.42 to $12.16, upsetting many family members hoping to sell some of their holding.
In response, 74-year-old former chairman Toby Blackwell—whose grandfather founded the Blackwell group in 1879—has been leading a campaign to force a trade sale of the publishing business. However, his nephew and current chairman of Blackwell Publishing, Nigel—along with Toby's son, Philip—are said to favor supporting the recently appointed managing director, René Olivieri, in his bid to turn the company around, and then go for an IPO in 3 years.
Due to the complex ownership structure of the company, the situation appears to be testing family loyalties to the limits and has deadlocked a decision on the long-term future for the company.
Toby Blackwell, who is president of Blackwell, Ltd., claims to own 30.1 percent of the voting shares of Blackwell Publishing, as well as 64 percent of Blackwell, Ltd., which in turn owns 9.3 percent of the Blackwell Publishing voting shares. Toby also claims the support of his son James, who has a 5.3-percent stake, and other individuals holding a further 7.5 percent.
On the other side of the barricades, Nigel owns 42.3 percent of the voting shares, and another 5.3 percent is held by Philip, who is rumored to be supporting the Blackwell board. In total there are said to be around 50 family members with voting shares.
An attempt was made to resolve matters in February, when independent corporate adviser Morgan Stanley was appointed to advise the board on its options. This only served to further inflame the situation, however, when Toby discovered that the intention was to give Morgan Stanley a specific brief to come up with options for keeping the company independent.
In March, in a further twist, U.K.-based publisher Taylor & Francis announced publicly that it had made an offer to buy Blackwell Publishing. "We made a public offer of [$438.5 million] to the Blackwell Publishing board, and we are still waiting for a considered response," said David Smith, Taylor & Francis CEO. "The family are at the moment in discussions, but they haven't given any indication other than to say that the EGMs and AGMs due to be held last week have been adjourned for a further 3 weeks."
The current situation threatens to distract the company at a critical juncture. With the industry in quick-fire consolidation mode, important decisions need to be made urgently. To its credit, the Blackwell board has continued to make strategic decisions despite the uncertainty. In April, for instance, it announced that it had acquired U.S.-based medical publisher Futura Publishing, which specializes in cardiology and vascular diseases.
For customers faced with buying decisions, the situation has become increasingly confusing—a confusion that has also spread to erstwhile Blackwell partner Swets & Zeitlinger. Some users, for instance, have been puzzling over possible implications of a Blackwell sale of Swets Blackwell, the subscription agency. Created in November 1999, this was formed by merging the Swets Subscription Service with Blackwell's Information Services.
"I heard that Swets is going to buy out the Blackwell shares and become just Swets again, but at the same time a rumor about Swets Blackwell being up for sale is doing the rounds," says Yvonne Halland, who is responsible for information procurement at CSIR Information Services in South Africa. "All very confusing!"
In fact, the Swets partnership was not with Blackwell Publishing, but Blackwell, Ltd. Moreover, all of Blackwell's shares have subsequently been acquired by Swets & Zeitlinger. Despite the name, therefore, Swets Blackwell is now fully owned by Swets.
However, the situation at Blackwell has also turned the spotlight on a planned ownership change at Swets. "Since 1995 the shares of Royal Swets & Zeitlinger Holding have been owned partly by investment companies and partly by members of the Swets family," explains a spokesperson on behalf of the Swets board. "The current investment companies have now indicated their desire to transfer their shares in Royal Swets & Zeitlinger to other parties and invest elsewhere."
This, he adds, is merely a "routine" process and "does not reflect at all how well or not Swets is faring." For Halland, however, this is merely a delicate way of saying that Swets is "up for sale."
Only time will tell how significant the ownership changes at Swets & Zeitlinger will prove. Meanwhile, the situation at Blackwell remains volatile. A news story in the U.K.'s Independent on May 26, 2002, suggested that Morgan Stanley has now been asked to auction off the business. Blackwell insiders, however, dispute this. "Toby Blackwell cannot get enough shares to get the board to sell … [and so] … he has (as I understand it) given up the attempt," commented one, on condition of anonymity.
Clearly, if Blackwell Publishing were sold, Taylor & Francis would be first in line. But as the publisher of some 600 journals, and around 600 books a year, Blackwell Publishing would likely attract other bidders, too—including the usual suspects of Wolters Kluwer, John Wiley, or even Reed Elsevier.
Interestingly, although the businesses of Blackwell and Swets have been decoupled, they now both find themselves in the same situation of having key investors wanting to jump ship.
For Blackwell the timing is not fortuitous. The Daily Telegraph reports that Blackwell Publishers' profits fell by 6 percent in 2000, to $7.9 million, on a $49.2 million turnover. Blackwell Science, meanwhile, lost $6.6 million on turnover of $156.2 million. And while the Swets & Zeitlinger Web site reports that the company made a net profit of $134.3 million in 2000, up 20.8 percent from the previous year, the suspicion must be that its investors believe the company has now seen the best of the investment opportunity.
Others in the industry seeking investment dollars should perhaps take note: Investors appear more focused on exits than entrances right now!