APN News & Media has confirmed it will pay $246.5 million to take control of its radio assets from America’s Clear Channel, as it announced a $132 million non-renounceable entitlement offer.
The acquisition will be funded through a fully underwritten entitlement offer, proceeds from the $69 million sale of APN Outdoor and debt from existing facilities.
The buyout came as APN said its full-year profit after tax but before exceptional items rose 10 per cent to $59.5 million.
The company also said it was running ahead of cost savings targets, having booked over $40 million in full-year cost savings.
The deal, revealed by The Australian Financial Review on Wednesday, will be funded by a $132 million fully underwritten 5-for-9, pro rata accelerated non-renounceable entitlement offer; $60 million in proceeds from last month’s sale of APN Outdoor; and $61 million in debt funded from existing facilities.
APN said it has received support for the deal from its top shareholders including Independent News & Media, Allan Gray Australia and Baycliffe Limited, representing 50.4 per cent of the company’s current issued share capital.
INM, controlled by Irish billionaires Tony O’Reilly and Denis O’Brien, is not participating in the entitlement offer but the company said it “remains committed to its stake in APN”.
APN has commitments from Allan Gray and Baycliffe, an investment vehicle controlled by Mr O’Brien, that they will take up their full pro rata entitlements.
Baycliffe is also sub-underwriting part of the entitlement offer equal to the entitlements of INM.
The relevant interest of Baycliffe of 30.8 per cent in APN will therefore not change as a result of the entitlement offer.
Chief executive Michael Miller said the acquisition meant the majority of APN’s assets would be in the growth businesses of radio, outdoor and digital.
“ARN and TRN are businesses that we know extremely well, having run them for almost 20 years.They are managed by highly competent teams and continue to deliver growth both in audience numbers and advertising revenues,” he said in a statement.
“We are confident that radio will continue to grow as a medium and that ARN and TRN will continue to capture a greater share of the market.”He added: “A key part of our thinking in acquiring full ownership of ARN and TRN was to boost operating cash flows to better position APN financially.”.
“The reduction in leverage from paying down debt through the year will considerably improve our refinancing options during the second half of 2014. Meanwhile we have sufficient headroom within our current facilities to meet all our obligations for the current year.“It is also very encouraging to have received the support of our major shareholders, a strong endorsement for the acquisition.”
APN said it remains committed to strengthening its balance sheet and is targeting the generation of operating cash flows of $60 million to $70 million for the full year 2014 to be used to pay down debt.It said it expects to achieve this target through continued focus on cash generation, ongoing restructuring and cost saving initiatives and increased operating cash flows under 100 per cent ownership of ARN and TRN.
The purchase price represents an enterprise value to ebitda multiple of approximately 6.9, in line with Allan Gray’s statement to The Australian Financial Review in October that it would support a buyout for a multiple of less than 7.Reported net profits were just $2.6 million, double last year’s figure, on continuing revenues down 1 per cent to $817 million. Like last year, there is no dividend.“These are APN’s best results in a number of years with NPAT and EBITDA growth at their highest level since 2007 and 2005 respectively,” Mr Miller said.