Rival bidders weigh up Tangent’s value

Jo Francis
Monday, February 22, 2016

Events at Tangent Communications were continuing to unfold as PrintWeek went to press, but despite the fluid situation one thing seems certain – one way or another there will be a new ownership structure at the embattled print and marketing services group before too long.

Whether those new owners will involve the members of the Green family currently involved in running it – Tim and Nick Green, and their multimillionaire uncle Michael Green who is bankrolling the buyout bid – remains to be seen. 

Tangent chairman Michael Green is also the group’s largest shareholder, with a 29.95% stake. 

On the face of it, the £6.7m offer by the Green-backed Tangent Holdings UK, known as Bidco, to buy the £26.25m business and take it private looks like a good deal, considering the PLC’s share price was trundling along at a 52-week low of 1.25p at the end of last year. 

But some shareholders with longer memories may well recall the heady days of 10p a share, and even 5p not that long ago. 

And then there is the small matter of how much has been spent on acquisitions over the past decade (see timeline), which comes to some £23.75m. All of a sudden £6.7m doesn’t look like such a great price. 

“Looking at the valuation it would be an interesting mathematical exercise to calculate how much value was destroyed in the last two years or so,” muses one web-to-print expert. 

The biggest deal, and the one that seems to have caused Tangent the most problems, was the £10.2m acquisition of Goodprint in 2012. The price was made up of £6.8m plus £3.4m of cash on the Goodprint balance sheet. 

At the time, Goodprint was making an operating profit of £1.2m on sales of £4m, had 120,000 customers, and a presence in 17 countries. The firm always seemed to feature highly in user reviews of online business card services. 

But, rather than taking Goodprint and its own Printed.com and making the Tangent web-to-print offering more than the sum of its parts, things seemed to go backwards. 

Was Goodprint overvalued, or was that value ruined by its new owners? Whichever, things went wrong pretty quickly. Closing Goodprint’s facilities and transferring the work to Tangent’s print factories in London and Newcastle proved costly, and the Goodprint contribution to profits fell short of expectations the following year.

By 2014 Goodprint was described as under-performing, and by 2015 had suffered an “acute” decline in sales to just £2.1m.

The brand was subsequently merged into Printed.com and is no longer reported separately. 

Despite these travails, and other problems at its Tangent Snowball business, a seasoned print M&A expert believes the group is under-valued, not least because of Printed.com, which added 25,000 new customers in the 2014/15 financial year and posted sales up 25% to £7.6m. 

“I think Tangent is undervalued at that [offer] price if you buy into the proposition of Printed.com and look at the money others have spent building those sort of brands,” says the M&A expert. “How much is Printed.com worth per customer?”

What do the Greens have to say about all this? Well, nothing at all beyond the statements made to the stock exchange and the contents of the offer document. 

As this issue of PrintWeek went to press, potential rival bidder Writtle Holdings had issued a statement complaining that, five days after announcing its interest, and a possible £7.64m cash bid, it had not received the requested information from Tangent Communications to allow it to carry out due diligence. 

“We just want the same information that certain Bidco directors have in order to be able to evaluate a possible offer in the interests of all Tangent shareholders,” says chairman Robert Essex.

“We are aware the clock is ticking and require the information quickly. We have received a lot of encouragement from non-management Tangent shareholders.”

If Writtle wants a listing itself, buying Tangent could be a relatively cost-efficient way of achieving that. And there’s still time for another bidder to emerge – could the Tangent brands possibly be of interest to acquisitive web-to-print behemoth Cimpress, even if only to remove a competitor from the market?

Things could get even more interesting. Whether long-suffering shareholders will give a ‘Green light’ to the Greens’ buyback plans remains to be seen. 


TANGENT TIMELINE

2000 

  • Ctrlp.com floats on AIM in May with an £8m valuation
  • Acquires Printbynet.com, group’s name is changed to ControlP
  • Tangent Communications acquires London Digital Printing in July
     

2002 

  • ControlP name changed to Documedia Solutions
  • Sells software and technology division to TripleArc
     

2005 

  • Acquired by Documedia Solutions, name changed to Tangent Communications PLC. Nick and Tim Green join the board
     

2006 

  • Posts sales of £6.61m, operating profit £626,000
  • Acquires marketing technology firm C360 for £4.5m, rebrands it as Tangent Labs
  • Makes proposed 272.5p a share offer for £400m-turnover St Ives, which is rejected
     

2007

  • Acquires Ravensworth Digital Services for £5.85m
  • Files turnover up 30% to £8.61m, operating profit of £1.07m
  • Share price high: 16.2p
     

2008

  • Approaches TMN Group with a possible offer, decides not to proceed
  • Sales more than double to £17.36m, operating profit of £2.44m
     

2009

  • The estate agent market proves challenging in 2008/09. Sales £15.61m, operating profit £1.08m
  • Acquires customer insight agency Snowball for £3.2m
     

2010

  • Sales of £18.2m, operating profit of £820,000
     

2011

  • Sales £22.4m, operating profit £1.35m
  • Relaunches Digital Print Partnership as Printed.com, aiming to be “the biggest B2B website in the UK”
     

2012

  • Sales £21.72m, operating profit £1.53m
  • Acquires Goodprint for £10.2m
  • Share price is 10.25p
     

2013

  • Sales up 11.8% to £24.3m, operating profit £1.62m
  • Reports highest number of active customers on record
     

2014

  • Sales up 11.3% to £27.03m, operating profit jumps 53.3% to £2.48m
  • Profit warning due to poor trading at Tangent Snowball
     

2015

  • Sales £26.25m, operating profit down 52.8% at £1.18m
  • Sales at Goodprint fall to £2.3m, brand is merged with Printed.com
  • Share price is just 1.25p
     

2016

  • Management launch £6.7m, 2.25p a share bid to take Tangent private
  • Writtle Holdings considers possible £7.64m rival bid

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