KEY POINTS:
CanWest MediaWorks' new owner, Ironbridge Capital, may face a fight to take full control of the TV and radio company after the second-largest shareholder revealed it had been buying more shares yesterday.
According to a substantial shareholder notice filed with the NZ Exchange, Brook Asset Management has been
buying more shares on the market to boost its stake in CanWest from 7.3 per cent to 8.3 per cent - just under the 10 per cent needed to block a full takeover by Ironbridge.
On Tuesday Ironbridge paid $386 million, or $2.43 a share, for the 70 per cent of CanWest owned by Canadian parent CanWest Global Communications and will offer the same price to all other shareholders. Ironbridge - an Australian private equity firm - needs 90 per cent of CanWest to force all shareholders to give up their scrip and effect a full takeover.
With CanWest shares closing at $2.40 yesterday, Brook would have paid less than the takeover offer.
Brook's Simon Botherway refused to comment on the fund manager increasing its stake - the second time in a week it has done so. But on Tuesday he said he would await the independent valuation report to decide whether or not to accept the offer.
Ironbridge has said it would be comfortable if CanWest remained listed.
Most media analysts yesterday judged the Ironbridge offer to be reasonable and recommended accepting the bid, as it was very unlikely a higher bid would emerge.
However, First NZ Capital analyst Sarndra Urlich said shareholders should hold out for a better offer.
"We believe there is no rush for the minorities to sell into this offer and we recommend investors wait until the independent appraisal report," Urlich wrote in a report.
"Furthermore, in the event that the stock remains listed, the share price is likely to be supported by the perception that Ironbridge is likely to want to mop up the remaining shares to gain full control."
Goldman Sachs JBWere says the offer is at a fair price and "for most traditional investors we would therefore advocate accepting the offer".
But the brokerage said that for investors "with an appetite for high risk/high reward investments, the current situation could present an opportunity".
If Ironbridge failed to reach the 90 per cent of CanWest stock it needed to make a 100 per cent takeover of the company, it could make a higher offer to the minority shareholders.
But it said foregoing the $2.43 a share offer from Ironbridge was risky, because if Ironbridge did not make a higher offer, then the shares would fall back around Goldman Sachs' valuation of $2.15.
Ironbridge said it was aiming for the TV and radio company's earnings growth to outpace the economy.
New Zealand representative Kerry McIntosh said yesterday it saw growth in CanWest, but not from cost-cutting. Ironbridge had some ideas about how to boost earnings, but had not yet discussed them with CanWest management.
Media companies' earnings are generally closely tied to the performance of the general economy, which affects advertising spending.
But one analyst said CanWest could strongly increase earnings if TV3 continued to take audience share from TVNZ, allowing it to charge higher ad rates. Much of any increase in advertising revenue would flow through to profits, as most costs in broadcasting such as programmes are fixed.
Meanwhile, Ironbridge remains in talks to retain the broadcaster's management team, and hopes to give an update on the discussions as soon as Tuesday.
Ironbridge said it was trying to sign up CanWest chief executive Brent Impey and his team to keep running the business and is expected to offer the senior executives a chance to invest in it.
Brokers' views
* Citigroup $1.81 target price
* Goldman Sachs JBWere $2.15 valuation
* First NZ Capital $2.50 target price
* Macquarie $1.78 valuation
* UBS $1.65 valuation
