We just received one of our regular updates from BNP Paribas' professional publishing research division which says....

Comment on Informa (Outperform, TP540p, +25%).

They highlight:

Informa confirmed it is in merger talks with UBM
A UBM-Informa merger is supported by a good strategic and financial rationale as it would create a leading player in the Events and Professional Publishing markets. Scale benefits should make the consensus GBP30m-50m in cost savings achievable, with synergies in IT investments and overhead likely.

Counter-bids are a possibility
In October 2006, private equity-owned Springer offered 630p per share to buy Informa. Management rejected this offer, arguing that it undervalued the merger's GBP50m+ in potential cost benefits. Applying the cost savings ratio observed in the Wiley-Blackwell merger suggest Springer (or its owners) could bid a further 10-15% premium on yesterday's closing price and
still reap half the estimated cost synergies.

Informa's current stock valuation looks attractive
Despite yesterday's share price jump, we believe the stock continues to offer upside. With a 7% 2008e FCF yield, Informa trades in line with its peers, suggesting that the stock has not yet captured a significant bid premium.

Sector read-across
In terms of a read-across for the Media sector, we note that the GFK-TNS and UBM-Informa mergers suggest that attractive valuations are triggering consolidation opportunities. In that context, Aegis appears to be an attractive vehicle to play further consolidation within professional media.