IHUG And Force Corporation To Merge
Media statement - for
IHUG AND FORCE CORPORATION TO MERGE
Internet Service Provider Ihug and cinema and entertainment company Force Corporation have announced their intention to merge the operations of the two companies.
The initiative will create a powerful new media communications group focusing on film, entertainment, Internet access, e-commerce, telephony and digital television. Following the merger, the Group will divest itself of Force Corporation's property interests including its Mt Wellington retail development and the Force Entertainment Centre to focus on its core entertainment and Internet businesses.
The deal is conditional upon Force Corporation shareholder approval at an Extraordinary General Meeting scheduled for late-March and will be effective from 1 April 2000.
The merger announcement follows the issue by Force Corporation of a "don't sell" notice to shareholders late last week. Force Corporation will change its name to Ihug Limited.
The proposed transaction involves the issue of 210 million Force Corporation shares as consideration for 100% of Ihug. The deal was struck at a price of 57 cents per Force share and ascribes a value of $120 million to Ihug. Ihug currently has net cash reserves of approximately $14 million, and the consideration to be paid for Ihug equates to an enterprise value of $1,000 per subscriber.
Chairman of the merged company will be former Executive Director of Lion Nathan Mike Smith. The other directors of the company will be Nick Wood and Tim Wood from Ihug, Peter Francis, Mike Daniel and Derek Presland who are existing Directors of Force, and Rob Campbell representing Tappenden Holdings.
Ihug is owned by the family interests of original founders Nick, Tim and John Wood with an 82% holding. Wood family interests will hold a 47% share of the new entity. Tappenden Holdings, a private investment company held 10% of the original Ihug (reducing to 6%), while other interests held 8% (reducing to 4%).
Ihug is New Zealand's second largest Internet Service Provider with over 100,000 active subscribers within New Zealand and Australia and around 20,000 telephone customers on its digital network. It also has a broadband digital television network.
Force Corporation is a listed company involved in cinema operations in New Zealand, Fiji and Argentina, and property development. Force is a shareholder in South Pacific Pictures, producer of "Shortland Street" and other TV programmes and feature films such as "What Becomes of the Broken Hearted". More than seven million people visit the cinemas owned by the Village/Force/Hoyts joint venture in New Zealand each year.
Ihug's managing director Nick Wood said Ihug had been looking for a media partner "to bring added value to a variety of projects it had in the pipeline. Force brings that and more to the table," he said.
"It is a natural fit for a company that is already developing a digital television service to combine with an organisation with access to the finest movies in the world".
The current Chairman of Force Corporation Peter Francis said "the chance to combine Force's stable entertainment business with Ihug's IT strength and strong growth prospects is an ideal match".
Ihug's CEO Nick Wood will continue as CEO of the Internet operations and Derek Presland will continue as CEO of the Force operations while the long-term management structure is put in place.
"Following the completion of the sale of the Force Entertainment Centre, the merged group will be debt-free and have substantial cash reserves to fund Ihug's growth," said Peter Francis.
A Notice of Meeting and supporting documents will be forwarded to shareholders in March, once approval to the notice of meeting has been obtained from the Market Surveillance Panel of the New Zealand Stock Exchange.
For more information, please contact:
Force Corporation Limited
Telephone: (09) 309 9137