• by Joe Mandese  @mp_joemandese, September 12, 2024

Ascential plc, the controlling shareholder of Hudson MX, Wednesday disclosed to shareholders that it "now believes it is unlikely that the proceeds of any sale" of the agency tech startup "will be sufficient to permit a distribution of net sale proceeds" it planned to allocate to shareholders.

While Ascential's board did not characterize the reason for the downgrade for its expectations for proceeds from a Hudson MX sale, it characterized the sale process as "ongoing with multiple parties."

Ascential's board did not provide any additional guidance on when a Hudson MX sale might be completed, but it had originally planned to allocate net proceeds of the sale to Ascential shareholders if it was completed prior to Ascential's own sale to another U.K. holding company, Informa plc, which its shareholders voted to approve.

Ascential currently owns 89.7% of Hudson MX's equity, with the remaining 10.3% 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.

Hudson MX suitors are believed to include its primary rival, Mediaocean, and possibly a consortium of ad agencies and/or others.

As part of its agreement to acquire Flywheel Digital from Ascential late last year, Omnicom agreed to participate and "assist" Ascential with its sale of Hudson MX, but to date has declined to comment on what that participation might actually entail.

As of March 21, when it reported its unaudited 2023 results, Ascential had been estimating the net value of a Hudson sale at $75 million.

By July 30, when it held an investors meeting reviewing its first-half 2024 results, Ascential had downgraded to about $65 million, and disclosed to shareholders that it had also taken a taken a $27.6 million "impairment in the carrying value of Hudson MX.

Asked by an analyst what Hudson MX's cash burn rate currently was during the briefing, Ascential CFO Mandy Gradden said it was $3 million to $4 million monthly.

While the Ascential board did not characterize if/when a Hudson MX sale might actually be completed, it now looks to be something of a fire sale.

"The Board of Ascential also believes that it is unlikely that any sale will be structured as a divestment of Hudson MX shares," it said Wednesday, adding: "The Ascential Board therefore does not currently expect a permitted dividend to be declared."