Paul Ramsay’s Prime Media Group has confirmed that Kerry Stokes’ Seven Network will become a major shareholder in a fund raising designed to ease financial pressures on the regional TV broadcaster.
At the same time the cash call is so big that the major shareholder, Paul Ramsay, has been unable to contribute up to his level of shareholding in the company of 43.32%.
The fund raising statement, up to $110 million in new equity to pay down debt, reveals Ramsay will contribute less than his full entitlement. The statement said he would contribute $25 million for 65% of his entitlement.
That will see his stake watered down to around 30%, depending on just how much money is raised.
Seven, which provides the programming for Prime’s TV stations in much of regional Australia, will stump up about $25 million for a stake of up to 14.9% in Prime through the equity raising.
It can’t take any more because it would fall foul of media audience limits. Seven controls the regional TV broadcaster, Seven Queensland.
The deal will give it the widest control and coverage of any Australian TV Network, in front of the WIN group of Bruce Gordon, which controls the WIN regional TV broadcasting business, and the Nine network stations in Adelaide and Perth.
It means Seven adds this stake in Prime to its 47% stake in the Seven media Group and 22% of West Australian newspapers, as well as smaller stakes in other listed companies, including GRD Holdings.
Prime will offer existing shareholders 10 new shares for every 7 they own at 48c a share, a 17% discount on the last closing price of 60c, before shares went into a trading halt on Monday.
The company hopes to raise up to $78 million from institutional investors and a further $10 million from retail investors.
Pressure has been building on Prime to improve its balance sheet, having more than doubled its debt to just on $300 million over the past two and a bit years as it expanded into regional radio and made acquisitions including the Becker Group and the badly-timed investment into Destra, the digital media company which collapsed.
These were mistakes of its own making: the slump in advertising income is the "icing’ on what’s a very sour- tasting cake for Ramsay and other shareholders.
The company slashed its dividend payout ratio last month, and said yesterday it would keep a "prudent approach” to its dividend policy in the future.
The company will use the funds raised to repay early part of a $231 million debt facility that expires 2012. It will also partly unwind interest rate swaps that had weighed on its latest earnings.
The share offer to institutional shareholders will run until tomorrow noon, while the retail offer will open on Friday and close late next month
Prime said that at the time of announcement, agreements to subscribe for new shares totalling in excess of $85 million have been received from PRH, Seven and a small number of Prime’s major institutional investors.
Shares issued in the offer and the placement will not be eligible for the interim dividend of 2c a share.
The shares will fall on re-listing.
