Regional television and radio owner Macquarie Media Group (MMG) plans to raise close to $300 million at a substantial discount to the market as it prepares to follow other Macquarie investment funds and leave the warm embrace of the parent.
Macquarie Media (MMG) said yesterday besides buying back the management rights from Macquarie Group, the company will also simplify its corporate structure and become one company.
The capital raising comprises an underwritten one-for-one renounceable entitlement offer at $1.55 per stapled security..
The securities last sold at $2.50 a share on Tuesday, so the discount is a hefty 38%, which should go some way to getting as many shareholders as possible to accept.
Macquarie Media chief executive Mark Dorney said in the statement to the ASX that the raising, along with existing the group’s existing cash of $323 million, will be used to retire debt at its Australian operations, Macquarie Southern Cross Media.
Net bank debt for the Australian business will be reduced to $306 million, from $860 million.
Much of the debt was taken on in the takeover of Southern Cross back in 2007. Fairfax media later bought Southern cross’s radio stations and Southern Star TV production house.
Macquarie Media said it proposes to take back, or internalise, the management of the company from Macquarie Group at a cost of $40.5 million, subject to securityholder approval.
"Importantly the independent expert, commissioned by the independent board committee, Ernst & Young, has opined that that internalisation is fair and reasonable to MMG security holders," Mr Dorney said.
"That internalisation will also produce some important cost savings to Macquarie Media Group going forward."
As well, Macquarie Media plans to transform its corporate structure from a triple stapled fund to a single holding company, that Mr Dorney said would be a very conventional public company "similar to every other media company here in Australia".
Securityholder are expected to vote on the proposals in December.
"These are key steps to maximising securityholder value and really positioning our business with the very best platform to capitalise on our leading regional radio and regional television operations here in Australia," Mr Dorney said.
In a trading update, Macquarie Media said preliminary estimates showed revenue and earnings before interest, tax, depreciation and amortisation (EBITDA) declined in the three months to September 30, but at a lower rate than experienced in the six months to June 30.
Revenue was down 5.6% and EBITDA was down 5.1% in the September quarter.
"Both those are market improvements on what has been experienced in the half," Mr Dorney said.
"That gives a good indication and good confidence around where our business is positioned and confidence in the outlook for the business in Australia going forward."
Mr Dorney said he would step down after overseeing the recapitalisation, internalisation and corporatisation, returning to Macquarie Group as an executive director.
Macquarie Southern Cross Media chief executive Rhys Holleran become chief executive of both Macquarie Media and Macquarie Southern Cross Media after Mr Dorney steps down.
Southern Cross is the regional affiliate of the Ten Network.
According documentation for the deals, Macquarie Group has a Principal Holding of 47.0 million MMG securities (24.8% of MMG securities on issue). This Principal Holding is held by the Macquarie Capital business division of Macquarie (through MMML and Macquarie Capital Group Limited (MCGL)).
Macquarie has a relevant interest in 50.2 million MMG securities (26.5% of MMG securities on issue).
This includes the Principal Holding and a further 3.2 million MMG securities (1.7% of MMG securities on issue) which are held by Macquarie entities for a range of different purposes and in different capacities due to the broad nature of Macquarie’s operations (including funds management, hedging, custodial and fiduciary services).
Macquarie Group will take up its 24.8% of MMG’s one for one issue.
Macquarie Group will not vote on the internalisation proposal.
MMG will change its name once the deals are finished.
According to the documents lodged with the ASX, the whole thing could take up to the end of 2010 to complete.
