What's going on?
Axel Springer saw its shares surge 22% on Thursday following news that investment firm KKR was looking to take the German media giant private.
What does this mean?
Europe’s largest publishing house – owner of the continent’s top-selling newspaper, Bild, as well as international websites like Business Insider – has struggled to juggle its old-school news and new-school online advertising arms. Despite investing heavily in its more profitable digital offering, tough competition has seen Axel Springer’s shares shed a quarter of their value in the last 12 months – and March’s announcement that the company wasn’t expecting any profit growth in 2019 didn’t help matters.
Private equity firm KKR thinks it could do better. It’s seeking the approval of Axel Springer’s CEO and the widow of its founder, who together own 45% of the $6 billion-valued company, to make an offer for the rest of its shares.
Why should I care?
For markets: More spring in everyone’s step.
In taking Axel off the stock market, KKR (which has previous experience in German media) may hope to split up some of the company’s off- and online publishing businesses before listing shares of the restructured firm at a tidy profit – as it’s shortly planning to do with transport-booking app Trainline. The deal isn’t guaranteed, however: recent failed private equity plays for listings site Scout24 and plastic packager RPC prove that things don’t always go to plan.
The bigger picture: Private equity is taking over.
The “alternative” investment industry is expected to control $14 trillion by 2023, up from $9 trillion in 2017 – and private equity firms, which own shares in non-stock market-listed companies, are expected to overtake hedge funds as its largest sub-sector. While several big US firms are finally “going public”, private equity spending in Europe is currently at a 12-year high. And with companies sitting on record amounts of cash, such investment is only likely to become more widespread – and more accessible to investors like you.