Shares in APN News and Media, the publisher of more than 100 newspapers across Australia and New Zealand, the largest Trans Tasman radio network and largest outdoor ad company, fell yesterday after Independent News & Media Plc abandoned the sale of its 39.1% stake in the company.
The decision came after Independent News completed a strategic review that considered a number of “unsolicited expressions of interest” in its shareholding, according to an APN statement to the ASX.
APN’s shares fell 8 Australian cents, or 3.7$, to $2.07 at the close yesterday.
That was more than $2 a share under the level that APN shareholders rejected in a buyout from INM and private equity groups a year ago.
INM said on October 31 that the sale of its stake in APN would allow it to cut debt by about 800 million euros and had put the stake up for sale, with Goldman Sachs and the ANZ Bank the lead managers.
That was at the height of the credit crunch in the wake of Lehman Brothers collapse and the move was also regarded as an heroic attempt to deny the inevitable: that there is no money for deals involving companies with high levels of debt trying to maximise prices for choice assets.
So no sale and as a result the future of Tony O’Reilly’s Independent News and Media is looking increasingly problematic after it provided a second trading update in two months and revealed plans to sell its 39% in APN News and Media in Australasia had failed.
O’Reilly’s Waterford/Wedgwood group has already collapsed into administration, so his business empire is under more pressure now as a result of the APN stake failing to sell.
The INM statement said it noted "the significant and unwarranted decline in INM’s share price" and then went on to detail justification for the sharp drop in the price with the failure to raise around 800 million euros from the APN sale. It cancelled its annual dividend and is cutting all spending.
It is forecasting total publishing revenues will contract by up to 6% in 2009 while, providing the credit and advertising markets don’t deteriorate any further this year, the company expects operating profit of between 240 million euros and 270 million euros, down around 10% on 2008. But 2008 profit will be down a third on 2007’s figure when the final accounting is done.
Although the group, which is controlled by Sir Anthony O’Reilly, said it was "more diversified" than many similar-size media groups with operations in South Africa, Australia and New Zealand, it is exposed especially to the badly recessed Irish and UK markets, where advertising has been hit by the credit crunch and slowing domestic economies, while the internet is damaging the business model.
There’s now speculation that INM will have to sell the Independent and Independent on Sunday to raise cash. A likely buyer might be a Russian billionaire.
One bought the Evening Standard in London from the Daily Mail Group last week. The Independent and the Daily Mail Group have started sharing back office and office facilities to save money.Tal ks are reported to be at an early stage in London.
INM said that “While there was significant interest in the APN stake, the deteriorating state of the credit markets made it difficult for interested parties to put together a fully-financed bid for APN at an appropriate value that would have been acceptable to both INM and to other APN shareholders".
INM, which has a 200 million euro loan due for repayment in May, will scrap its final dividend, saving 60 million euros and is preparing a private bond issue and further unstated asset disposals.
The stock has fallen by 37% over the past month and over 90% over the past year on concerns over the group’s ability to service its huge borrowings in light of the weakening advertising market,
The challenging outlook was highlighted by INM itself when the group said it did not expect any improvement in global advertising conditions. Tough times to continue, in other words.
And in Canada, The Ten Network’s owner, Canwest Global Communications has cut more jobs and two news broadcasts at its station in the Canadian city of Toronto.
Just under 40 employees will be made redundant in yet another cost cutting move from the struggling group which owns nearly 57% of the Ten Network here.
Canwest decided in November to cut Global Toronto’s morning newscast, and last week added the lunchtime broadcast to the axing list, along with up to 40 jobs.
Canwest is Canada’s largest media company and it said in November it would slash 5% of its Canadian workforce, or 560 jobs, as it struggles to deal with slumping advertising revenue, brutal economic conditions and fierce competition.
Those layoffs included 210 positions at Global and Canwest’s other television operations: the layoffs are on top of the November figure. (Source)
Earlier this month Canwest warned that because ad conditions had worsened further since the November statement, it might be forced into a position where it could breach lending covenants on a small loan.
It was the second time in as many months that the company has highlighted possible problems with bankers. In November it was given more leeway after talks with lenders, but that seems to be u
