• by Joe Mandese  @mp_joemandese, July 30, 2024

British media holding company Ascential plc has dramatically reduced the value of Hudson MX -- which it acquired majority ownership of, and which it originally put on the block to be sold in October 2023, when Ascential still was a minority owner of the beleaguered agency tech startup.

In first-half results released this morning, Ascential says the reduced value of Hudson MX "reflect a longer than expected sales process and an update by management" to an "external expert."

Ascential -- which had originally told investors it expected Hudson MX to be sold in the first half of this year -- says the sale is ongoing with multiple sources, but that it now expects it to take place in the second half of 2024.

Last week, Ascential itself went into play following a $1.5 billion acquisition offer from British media company Informa plc, which the Ascential board has recommended to its shareholders.

At that time, Ascential and Informa said the net proceeds from a sale of Hudson MX would be paid as a dividend to Ascential shareholders if it was sold before Ascential and Informa merged.

Ascential currently owns a controlling stake of 89.7% of Hudson MX's equity, and the remaining 10.3% is believed to be owned by a group of common shareholders including former Hudson MX CEO JT Batson (now CEO and Secretary General of the U.S. Soccer Federation), seed round investors Michael Kassan and his son Alexander Kassan, and possibly others who were part of a restructuring of Hudson MX's equity ownership in February 2023 that canceled the shares of all other common shareholders, including those of Hudson MX employees and contractors who exercised their options agreements.

As part of this morning's disclosures, Ascential said it has taken a $27.6 million "impairment in the carrying value of Hudson MX, which has been measured at the lower of carrying value and fair value less costs to sell.

"This is a key source of estimation uncertainty and reflects the longer than expected sales process and an update by management to the discounted cash flow valuation conducted by an external expert at 31 December 2023 for trading and economic conditions as of 30 June 2024."

Likely suitors for Hudson MX's assets include chief rival Mediaocean, and potentially a consortium ad agency holding company investors, though Ascential so far has not disclosed the identities of any suitors.

Based on the continuing devaluation of Hudson MX's assets, and the fact that Ascential itself is in the process of being sold and has listed Hudson MX as a discontinued operation held for sale, a deal looks to be something of a fire sale.

During the question and answer session with securities analysts, Ascential shed a bit more light on the sales process, as well as its shareholder’s exposure in terms of if and when a Hudson MX sale goes through.

“Given the parties you’re negotiating with on Hudson know you have to get this done by sometime in Q4, why don’t they just wait until then, because they think they’ll get the best price when they’re close to the wire,” Barclay’s Capital’s Nick Dempsey asked, adding, “Why don’t they just sit on their hands until the very last moment?”

“We have been very highly motivated to execute the sale of Hudson since we announced it back in October 2023. And that really hasn’t changed,” responded Ascential CFO Mandy Gradden.

“What’s the fallback if the sale doesn’t happen? Is there any cost to Ascential shareholders from here on in,” asked Berenberg’s William Larwood, to which Gradden responded, “I think Ascential shareholders benefit to the extent there is a disposal ahead of closing. Ascential shareholders don’t have a downside opportunity on Hudson.”

Lastly, an undisclosed analyst posted an online question asking what Hudson MX’s “current monthly cash burn” rate is, which Gradden disclosed is between $3 million and $4 million per month.