IN&M makes fresh approach for Australian unit

Sir Anthony O'Reilly has enlisted the support of private equity giant Carlyle Group for a renewed attempt by Independent News & Media (IN&M) to take private its 40 per cent-owned Australian subsidiary APN for A$3.75 billion (€2.26 billion).

The fresh approach for the publisher of the New Zealand Herald and owner of numerous radio stations, regional newspapers and outdoor advertising interests in Australia comes two months after a previous buyout proposal with the Providence private equity group foundered.

Providence remains on board on this occasion, but in partnership with Carlyle. As with the previous approach, the proposed leveraged buyout is designed to enable Independent to take significant cash from APN while retaining indirect control of the business.

The proposed transaction could raise €350-€415 million for Independent, money that would be used to fund its international expansion. The group entered the Indian market in 2005 and it wants to concentrate on non-English speaking markets in the next phase of its expansion.

The latest joint approach values APN at A$6.05 per share, three cent higher than the original approach last October. It has been reported in Australia that some large minority shareholders wanted a higher price when Independent made its first move.

However, this latest approach is priced at a discount to APN's closing price of A$6.15 on the Australian stock exchange yesterday. The current valuation of the stock is considered to reflect market expectations that Independent would renew its approach.

The October approach placed an enterprise value of A$3.8 billion on APN, but reductions in its debt since then and currency fluctuations mean the new attempt to buy the group implies an enterprise value of A$3.75 billion.

The exact circumstances of the collapse of the previous approach remain unclear, but Sir Anthony has been seeking to extend his reach in Australia for some time. The catalyst for corporate activity around APN was reform of Australian media laws that restricted the foreign ownership of media assets.

IN&M would manage APN if its approach is successful. However, the group would be treated as an associate company in IN&M's books. It is currently treated as a subsidiary.

The involvement of private equity groups such as Carlyle and Providence opens up the possibility of Independent moving to full control of APN whenever its partners exit the group. It would be normal for Independent to have first refusal on their stake whenever they sell out.

Independent confirmed the latest approach late last night in a statement that followed a report in the Australian media.