Shares in APN News & Media will jump today after its cash strapped parent in Ireland indicated it had received offers for its stake and would sell.
Independent News and Media, 28% controlled by Tony O’Reilly and his family, said it would sell its near controlling interest in APN, a move that will test market appetite for old fashioned media assets at a time when they are on the nose around the world.
The offers, received by INM for its 39.1% of APN News & Media, the radio and newspaper group, were not further identified by INM, or in subsequent media reports(Source).
They also come at a time of a slow thaw emerging in the credit freeze, which could see some interest, compared to a month ago.
The announcement of the willingness to sell will see APN shares rise sharply from Friday’s close here of $2.41
.
That was up 6 cents on the day, not the move of a share about to be in play.
APN is Australia’s other (after Fairfax) regional newspaper group, and has a half interest in the Australian Radio Network with Clear Channel of the US.
It is also the other major newspaper publisher in NZ (again, with Fairfax the major rival) and has significant radio interests as well. It also has a major outdoor advertising business.
A price wasn’t mentioned by INM in its statement: it merely said that it had received a number of approaches for the APN equity stake and that its disposal of that holding is expected to reduce its debt by 800 million euros or $US1.01 billion, or around $A1.5 billion. INM needs to find 200 million euros to refinance a bond issue falling due early in 2009.
In late 2006, INM offered $A1.9 billion to buy the 60% APN it didn’t own. That was at $6.20 a share.
At Friday’s close of $2.41 the company had a total market cap of $1.18 billion. INM is clearly expecting to get a substantial premium, something that is hard to see, even with the slight recent slight thawing in the credit freeze.
The figures contained in the statement for the debt reduction from the sale, of around 1.5 billion, is more than what APN is valued at, so the cost per share in any deal would be more than double the $2.41, which is hard to see at the moment.
But if sold, the money raised would help cut INM’s debt by more than half, a move that would satisfy some dissident shareholders in INM and analysts in London.
At the same time as revealing the unsolicited approaches, INM revealed staff and other cost cuts aimed at reducing operating costs and improving profits at an time of declining sales and advertising revenues
The news sent the shares surging 27% in London Friday night, in spite of INM also unveiling a profits warning and significant job cuts across the group including at The Independent and The Independent on Sunday papers in London where more than 10% of the staff will be sacked.
The most logical buyers are trade as private equity funds are battling to obtain finance for deals already planned.
But at the price suggested in the statement from INM, even the most cashed up buyer would be wary, given that Australia’s economy if expected to further slow next year, with ad revenues forecast to be down across the board for all types of media.
So local Australian media groups might be the most logical buyers: Fairfax Media can’t be one because of its already extensive Australian and New Zealand newspaper and radio interests; News Ltd, part of Rupert Murdoch’s News Corp, might fancy its chances, but the purchase of the FPC local papers and magazines in Sydney 18 months ago would make it very tough.
Macquarie Media Group may have been interested, but it has run into problems with investors over its huge debts.
Its regional TV business for the Ten Network would fit with the APN papers, but not radio, which would have to se sold in some centres.
That might be tough in the current climate. The Ten Network is struggling because its Canadian parent, CanWest, is in a cash bind with huge debts of its own.
The Seven Network might be interested: it still has a fair bit of cash from its deal with private equity group, KKR, but there are question marks about the precise level of debt involved.
Whether Kerry Stokes, the controlling shareholder in Seven Network, would be interested in paying a big premium to Tony O’Reilly and his family, is another thing.
Stokes is stalking West Australian Newspapers and will be at this week’s board meeting in Perth.
INM warned on Friday that group net profits, excluding exceptional items, could fall as much as 17% in 2008 on the back of weaker advertising and a slowing global economy.
Diluted earnings per share would be down 20% to 23%. Revenues are expected to be 2% or more and lower next year. The cost cuts are aimed at chopping 50 million euros from its cost base, plus the savings from the lower interest bill.
Here’s what it said about the sale idea:
"Independent News & Media PLC [‘INM’] has received a number of unsolicited expressions of interest in respect of its 39.1% shareholding (representing 191.5 million shares) in leading Australasian media company, APN News & Media Limited [‘APN’].
"INM has been a shareholder in APN since 1988 and continues to believe that APN possesses a unique and valuable collection of high-quality and market-leading publishing, radio and outdoor advertising assets.
“While INM continues to be fully supportive of APN and its management team, it has received unsolicited approaches regarding its stake in APN and believes it is no
