Independent News & Media's bid to take over Australian media group APN has suffered a major setback after a key shareholder, Perpetual Investments, said it would vote against the offer of $6.20 a share.
"Perpetual advises that, provided there is no material change in circumstances, its current intention is to vote against the proposed scheme of arrangement for APN," the company said in a statement to the Australian Stock Exchange.
Perpetual, which has an 11.7 per cent voting stake, is unable to block the deal on its own. However, Australian Foundation Investment Company (AFIC), which holds 1.3 per cent, said last week in a letter to its shareholders that it would also vote against the deal.
"We do not believe we would be receiving fair value for the underlying assets we are being asked to sell. We would rather retain our interest in the company," said AFIC chairman Bruce Teele.
Together, the two funds hold 13 per cent of APN, just 2 per cent shy of the number of votes required to block the entire deal.
The scheme of arrangement requires the approval of 75 per cent of the shares voted. However, because INM cannot vote in the scheme of arrangement with its 40 per cent stake in APN, it means Perpetual and AFIC's combined stake represents almost a quarter of the remaining 60 per cent of eligible shareholders.
A third fund, Maple-Brown Abbott, which holds about 7.5 per cent of APN, is also reported to be opposed to the deal and, according to Australian media reports, about 20 per cent of proxies received have also been cast against the scheme of arrangement.
That would spell defeat for the proposed take-private bid organised by INM in a consortium that includes private equity firms Carlyle Group and Providence Equity Partners.
Australian institutions are increasingly rebelling against takeover offers and private equity deals that some consider to be opportunistic or too cheap. At the end of February, Lazard Asset Management halted Flight Centre's $1.6 billion management buyout, backed by private equity firm Pacific Equity Partners.
In March, Australian private equity firm Archer Capital succeeded in its takeover of sporting goods retailer Rebel Sport, but only after narrowly defeating institutions unhappy with its $368 million takeover offer.
APN will hold an extraordinary general meeting on Friday, where management will seek approval for the bid. INM shareholders voted in favour of the deal last Friday.
INM declined to comment on the latest development in what has become a long-drawn out bid. Last month, INM raised its offer to $6.20 from $6.10. The initial offer price was $6.02. If the deal goes ahead, Independent expects to realise at least €375 million in cash from the highly-leveraged transaction in which it will simultaneously sell APN shares and buy them with support from Providence and Carlyle.
