SIR ANTHONY O'Reilly's Independent News Media (INM) has signalled the end of its 20-year involvement in the Australian market by initiating a review of its control over 39.1 per cent of APN News Media, a business it tried to take private only last year.
INM, which said the development followed "a number of expressions of interest" in its APN stake, said any sale of the shares would reduce the net debt on its books to less than €600 million from €1.4 billion.
The firm said such a transaction would be "earnings neutral" next year as the consequent reduction in its interest bill, which exceeded €93 million last year, would offset the loss of profits from APN.
INM's shares rose 28 per cent higher to close at 64 cent on foot of the review, which will be led by Goldman Sachs.
The stock, which traded around €2.57 a year ago, has been under pressure due to INM's high debt and the likelihood of a sharp drop in earnings for 2008 due to economic weakness in some of its core markets. Earnings per share are now forecast to come in 20 to 23 per cent weaker this year.
As part of a new effort to cut operating costs from the loss-making Independent and Independent on Sunday titles in London, INM said it was in discussions to introduce shared-services operations with certain British national newspaper groups.
Such arrangements would be designed "to create more efficient editorial work flows" while preserving the titles' editorial ethos, INM said. The company, which has outsourced many newspaper production operations from its Irish unit, declined to specify the nature of the activities in question.
Also undisclosed was the identity of the groups that have made approaches for INM's stake in APN. The review is expected to continue for some months.
INM's approach to take APN private last year with private equity firms Providence and Carlyle put a value of some Aus$3.75 billion (€1.97 billion) on the business, or A$6.05 per APN share. The bid was backed by INM shareholders but rejected by APN investors.
APN shares closed yesterday at A$2.41, valuing the business at €1.18 billion. This means INM's interest in APN is worth A$461.38 million or €241.62 million. INM's own market capitalisation last night was €536.78 million.
"The board of INM believes that APN's current share price does not reflect the inherent value of the underlying assets and the position of APN as a leading media company in Australia and New Zealand," INM said.
"The INM board believes that the significant proceeds receivable from monetising its shareholding in APN would substantially enhance INM's balance sheet. The board believes the proceeds could be better utilised for the benefit of all its shareholders by substantially lowering INM's net debt, with subsequent flexibility to assess other global investment opportunities."
