Independent News & Media has agreed to sell its 18.6 per cent stake in Australia and New Zealand-based APN News & Media for about €121.3 million, clearing the company’s legacy of debt.
The group described the sale as a “pivotal” event that would allow it to pursue a strategy of acquiring new businesses, particularly those that will assist its growth in digital media.
INM has entered into an agreement with Credit Suisse to sell the stake at AUD$0.88 per share, a 6.4 per cent discount to the stock's closing price on Wednesday. INM group chief executive Robert Pitt said it was an "appropriate time" for the group to realise the value of its investment.
At the current exchange rate, the sale will lead to gross cash proceeds of €121.3 million, with net proceeds of €115 million, effectively eliminating a hangover of debt relating to the boom era.
“It’s a new world for us,” said INM chairman Leslie Buckley.
He said there had been “a lot of pressure” to sell its stake in APN two years ago, but the group had held onto it because it believed it was undervalued. The waiting paid off, with the company benefiting from a substantial climb in APN’s share price on the Australian Stock Exchange since then.
Although the company has now returned to a more “solid financial footing”, Mr Buckley stressed that this “doesn’t take from the fact that we have to operate this business in the most cost-effective way possible”.
In 2012, INM’s net debt was a precarious €420 million. A deal with its banks in 2013 involved the writing off of €138 million in debt, while the sale of its operations in South Africa, pension scheme cuts, other cost reduction measures and an issue of ordinary shares had also reduced its debt.
At the end of 2014, total borrowings stood at €125.5 million and its net debt arrived at €89.3 million. The release of €10 million South African warranties has further reduced the total borrowings to €115.5 million since then.
As a result, the company has now “categorically completed” its deleveraging plan and is released from various restrictions on acquisitions, dividends, share issues, share buybacks and capital expenditure.
Following the completion of the sale, the group will put in place a lower-cost revolving credit facility with its banks to facilitate “opportunities to invest in digital strategy”, including potential bolt-on acquisitions and investments, it said.
“We haven’t been in the acquisitions business because we haven’t had the cash. We will now be able to make acquisitions, and will be looking at the digital area,” Mr Buckley said.
“Do I have something particular in mind? No,” he added.
The sale of the APN stake will take place in two tranches, with the first to take place on March 25th. The second, which will represent almost 55 per cent of INM’s stake, will require approval at an emergency general meeting of shareholders, but the irrevocable undertakings necessary to carry this through have already been received.
Denis O’Brien, who is the largest shareholder in INM, has also sold his 12 per cent stake in APN News & Media through his private investment vehicle Baycliffe.
APN chairman Peter Cosgrove described the share sell down as an historic moment. “This is a defining moment for APN that also reflects a new era,” he said.
Rupert Murdoch’s News Corp is increasing its stake in the Australian media company from an undisclosed level to 14.99 per cent, the maximum shareholding a foreign firm can hold in Australia without making a formal takeover offer.
APN owns a number of radio stations, daily and non-daily newspapers, digital media properties and out-of-home advertising sites in Australia and New Zealand.
