Leaked Email Spells End of Future Monopoly Dream

Future’s dreams of total domination of the games magazine sector was completely derailed this morning, as the Bath publishing giant was forced to make a sensational climb-down in its attempt to buy-out Highbury.

The deal, the subject of endless smug management meetings at Future, has been completely abandoned following the Office of Fair Trading’s decision to refer the case to the Competition Commission.

SPOnG this morning received confirmation that the deal had been abandoned in an email from Future CEO Greg Ingham, which was leaked to us at start of business, reproduced here in full:

Morning everyone.

We have announced to the Stock Exchange that we will not be pursuing our recommended acquisition of Highbury House. This decision was taken after the Office of Fair Trading (OFT) announced yesterday afternoon that it had decided to refer our deal to the Competition Commission.

Here is our announcement:

Following Future plc’s statement yesterday, noting the Office of Fair Trading's announcement that it had referred to the Competition Commission the anticipated acquisition by Future plc of the issued ordinary share capital of Highbury House Communications plc ("Highbury") and that, consequently, the offer for the issued ordinary share capital of Highbury dated 11 March 2005 had lapsed in accordance with its terms, Future plc believes that it would not be in the interests of Future plc's shareholders to pursue further a possible acquisition of the issued ordinary share capital of Highbury. Future plc will accordingly approach the Competition Commission to seek a cancellation of the reference.

So what happened, why will the deal now not go through, and what does it mean for Future..?

The OFT's view was that this deal would lead to a lessening of competition in the computer games magazine sector. This is not a view shared by Future, Highbury, our legal advisers many within the computer games industry itself. Barriers to entry are relatively low, and new generations of consoles provide opportunities for launches, a characteristic which is not found in other magazine sectors. Further, there are 3,324 consumer magazines in the UK and there are just 23 computer games titles.

We do not agree that the OFT verdict is right and do not accept that the deal would have been adverse for consumers.

Ultimately, though, there is no point in bleating about the decision. Future took detailed, extensive, careful advice from leading competition, legal and financial advisers; we produced reams of analysis (for which, many thanks to all who worked so hard here); and we presented our case jointly with Highbury to the OFT.

A referral meant that the deal could have been subject to up to six months or so of analysis by the Competition Commission. Tying up so much management time on this was simply not justified. And meantime, it is likely that the Highbury portfolio would continue to face issues which the company itself has acknowledged has affected their trading. This means that the risk on the value of the deal would have increased.

Meantime, as we have said on a number of occasions, there are various other opportunities out there, both in the UK and the other countries where we trade. Future has been debt free for three years and so has significant financial firepower to consider carefully a wide range of acquisition targets. And we have a great portfolio of over 70 UK magazines, which is not at all affected by this decision.

Our commitment to doubling the sales and profit of the business within four years remains, of course.

One last point. When we reflect on this deal, there is much we have learnt. About people and structure and magazines and culture. About deal process and public company takeovers and governmental bodies (grr!). And about Future: acquisitions are a great way of holding a mirror up to our own company, of providing a reality check on why we do what we do.

So, although we're surprised and disappointed, we move on. We'll find other things to do.

Onwards - regardless...

Greg

Greg Ingham
Chief Executive
Future, plc