Nature's $5 bln IPO has good chance of flourishing - Nasdaq.com

"Academic publishing is usually as exciting as a Friday afternoon biochemistry lecture. Among this crowd, Springer Nature's initial public offering, valuing it at up to 3.9 billion euro ($4.8 billion), counts as racy. High debt and a narrow focus on academic periodicals may be drawbacks. But the publisher looks cheap and is well-positioned if demand takes off for open-access science journals. The main purpose of Springer's IPO is to cut debt. Even after raising a planned 1.2 billion euros, the company's leverage of 3.5 times EBITDA would be above RELX's ratio of 2.2, which includes pension obligations. At the top of Springer's pricing range, one third of its enterprise value would be net debt. That spells volatility. A 20 percent change in its EV/EBITDA multiple would move the shares by 30 percent, compared with 23 percent for RELX. The German group is also less diversified, with 70 percent of sales coming from research, compared with one-third for RELX's equivalent unit. A cut-price IPO valuation more than accounts for those risks. The initial range implies an enterprise value of between 9.3 and 10.7 times last year's EBITDA, compared with RELX's multiple of 14.7. Even if the German group only partly closed the gap, and traded on the 13.3 average for RELX, Informa and Wolters Kluwer, its shares would be worth almost two-fifths more than the top of its IPO range. Springer has another advantage. Free-access journals, where publishers charge authors a fee, are challenging traditional periodicals, which universities pay to access. Springer's prospectus boasts of a leading position in that small but fast-growing sector. That allowed its main research business to grow by 3.2 percent last year in organic terms compared with the academic research market's 2 percent expansion. Faster-growing companies tend not to trade at a discount for very long...."