Tuesday 25 October 2016 05:50 PM
UPDATE: NZME considering A$156M purchase of local Adshel business
By Paul McBeth
Oct. 25 (BusinessDesk) - NZME is considering buying Adshel's local business for A$156 million after former parent APN News & Media's buy-out of the outdoor advertising business triggered an option for the local media group to buy the assets on the same terms.
Sydney-based APN today signed a deal to buy the 50 percent of Adshel it didn't already own from Clear Channel Outdoor, giving it control of 22,000 static and digital panels across Australia and New Zealand, it said in a statement. Adshel generated earnings before interest, tax, depreciation and amortisation of A$42 million on revenue of A$170 million in the year ended June 30, of which the New Zealand contributed 22 percent, or A$9.3 million in earnings on sales of A$19.8 million.
APN plans to raise A$273 million through an institutional placement and renounceable entitlement offer to pay for the acquisition, selling shares at a discounted A$2.45 price. However, the New Zealand business, which has 150 digital screens and another 70 planned for the current financial year, could get bought by NZME under an option included in the media company's demerger from APN earlier this year.
Auckland-based NZME, which publishes the New Zealand Herald newspaper and operates the Radio Network stations, has one month from the date of completion to make up its mind on whether to exercise the option and a further two months to complete its acquisition if it does, APN said.
The deal's 12.7 times ebitda multiple implies a price tag of A$118.1 million, though APN says the NZME option would generate gross proceeds of A$156 million and the New Zealand company has taken that figure at face value so far.
"NZME will consider this option following the announcement from APN today regarding the buy-out of Adshel, but has no announcement to make at this time," chief executive Michael Boggs said through a spokeswoman.
NZME had cash and equivalents of NZ$13.8 million as at June 30 and could draw a further NZ$48 million on its NZ$160 million banking facilities. However, its proposed NZ$122.2 million acquisition of Fairfax Media's New Zealand assets includes an NZ$55 million cash component and would see the merged media group increase its banking lines by NZ$90 million to NZ$250 million, making the Adshel business a bit of a mouthful.
"If NZME elects to exercise the option and acquires Adshel NZ from APN, APN will consider, and if appropriate having regard to the position of APN at the relevant time, implement one or more capital management initiatives to return excess capital to shareholders," APN said.
APN and NZME have a 12-month non-compete clause, which excludes the New Zealand Adshel business.
NZME's NZX-listed shares were unchanged at 68 cents, while APN's ASX-listed stock last traded at A$3.38.