With OB sold and Studios staying, Will Strauss looks at why the BBC doesn't yet have a buyer for Post Production.

So, finally some of BBC Resources has a buyer. Satellite Information Services (SIS to you and me) has been granted preferred bidder status for BBC Outside Broadcasts. It will pay somewhere between£20m and£50m depending on which report you read. Personally I would say it's nearer the£20m mark.

The fact that the business is being split up comes as no surprise. Resources was never going to be sold as a three-part business as so few other commercial businesses in the world operate in all three spheres. If you doubt me, just try naming some.

But that leaves two components unsold. Studios has been removed from the table because - I understand from reading between the lines - that offers weren't high enough. And, besides, the building is to be sold in a few years so that doesn't seem like a very attractive purchase. Offers for the site - and the land around it - should be more plentiful.

According to the Times there is£300m to be had at some point.

  • Plenty of offers have already come in to buy Television Centre, some from Japan and Germany. It is expected to raise no more than£100m, however, because it is in such poor condition and needs an asbestos clean-up before it can be developed, probably into flats and leisure venues. Surrounding land could increase that to boost the corporation's coffers by£300m.

So that makes some sense. But what now for the third piece of the jigsaw, BBC Post Production? It is a very well equipped facility within spitting distance of BBC Production that employs a LOT of talented people. You'd think that offers would flood in. Especially if guarantees of work of are on the table. Yet, according to the most recent reports, there is only one bid on the table and we don't know exactly who that is.

Tara Conlan reports on Media Guardian that

  • Staff in BBC Resources' third business, post production, are awaiting their fate as the BBC continues discussions with just one bidder - understood to be a company based in west London.

The bosses of the independent facilities that I speak to seem to think that Resources was overpriced and the liabilities were too big.

One talks of “stratospheric numbers” being asked for and of there being no real “guarantee of business.”

Another isn't keen on the baggage that comes with Resources. He also welcomes the fact that more BBC work will go to other companies once the corporation is shot of Post Production. He said:

“The liabilities are so huge. Regardless of the size and quality of the workforce. I see it as an opportunity. It could mean that more work comes out to the independent facilities sector.”

True value

A reputed fee of around£50m for Post does seem excessive if you consider that turn over is around£38m and there is no guarantee of future work. Profits are not huge (although Resources is not seen to be profit making and proceeds go to the major shareholder - the BBC).

However, please humour me for a second as I'd like to work out its value. On its books, Resources made a profit of£5.2 million on a turnover of around£130 million last time out. Divide that by three and Post (bearing in mind I'm making some big assumptions here) made a profit of£1.7m. Now, to work out the value of a business I usually uses a multiple of EBITDA which is (E)arnings (B)efore (I)nterest, (T)axes, (D)epreciation and (A)mortization.

So if we add£1.7m of profit to personal expenses, extraordinary expenses, bonuses, interest payments, depreciation on machinery and good will (if there is any) and then times it by five (which is a good rule of thumb) I don't think we're going to get to anywhere£50m.

Obviously there are lots variables. And EBITDA also leaves out the cash required to fund working capital and the replacement of old equipment, which in this case could be significant. So, yes it does seem overpriced.

Interest from abroad?

My own assumption all along has been that an international company would end up buying BBC Resources. Only a company with serious clout that could use the brand as part of a UK ‘invasion' or expansion would see true value in those floors in TV centre.

As it is, the staff - the important people in all this - will be well treated post sale (thanks to Bectu) and the company will pass onto someone from Blighty that will keep it going, hopefully bringing it into line with other independent commercial operators, make it more commercially astute and maintain its place as a major player in the sector.

Or, as was admitted today, it might not be sold at all. And I don't think - with a price tag of£50m - that would surprise anyone.

Is Will talking cobblers? Or does he have a point? Have your say below.