W & H deal offers prelude to expansion

By KARYN SCHERER

Australian media group APN News & Media is making no secret of its plans to follow up its $1 billion offer for New Zealand media group Wilson & Horton with further expansion in Australasia.

APN confirmed yesterday that it is offering $A809 million ($999 million) for Herald publisher Wilson & Horton in a move widely seen as enabling it to more easily snare a share of Australia's biggest publishing group, John Fairfax Holdings, which owns the Sydney Morning Herald.

It will finance the deal through a combination of ordinary shares, convertible notes and bank debt. APN will also assume $A423 million of debt.

The move is essentially a restructuring exercise for Dublin-based Independent News & Media (INM), which controls both companies.

INM already owns 100 per cent of Wilson & Horton and the deal will boost its stake in APN from 40 per cent to around 45 per cent. It will also enable INM to lighten its debt burden.

The Irish company said yesterday that the move would enhance its financial position and strategic flexibility, "leaving the group well-positioned for future growth".

APN chief executive Vincent Crowley was coy about the company's ambitions but he did not deny speculation that Fairfax was likely to be its next target.

The deal will increase APN's market capitalisation from $A980 million to about $A1.5 billion, although it will still be dwarfed by Fairfax, which is worth around $A2.5 billion.

Integrating APN and Wilson & Horton is initially expected to save around $A2.5 million a year by cutting head office costs and integrating IT systems.

The two companies already share ownership of New Zealand's largest radio company, The Radio Network, along with United States-based media company Clear Channel.

Mr Crowley told a news briefing in Australia that the company had not yet forecast further cost savings.

He also suggested that Wilson & Horton would benefit from being controlled from Australia, rather than Dublin.

Holders of Wilson & Horton cumulative exchangeable preference shares will continue to receive fully imputed dividends and the shares will remain listed on the New Zealand stock exchange.

As part of the deal, two Wilson & Horton directors, chief executive John Sanders and deputy chairman Sir Wilson Whineray, are expected to join the APN board.

While the two companies will effectively be run by one board, a separate New Zealand board will be maintained for the New Zealand-listed shares.

The offer has forced the Irish company to reveal financial forecasts for the Wilson & Horton group, which also owns regional and community newspapers, magazines and the country's largest commercial printer.

Although revenue is expected to increase across the group by just over 3 per cent next year, earnings before interest and tax are expected to increase by just over 7 per cent.

The group expects a 2.8 per cent increase in revenue this year to $484 million. The increase is expected to be almost entirely from its commercial printing operations, which make up about a quarter of its revenue.

Earnings before interest, tax, depreciation and amortisation (ebitda) are expected to increase by 6.2 per cent to $146 million, while earnings before tax and interest (ebit) are forecast to rise 4.8 per cent to $115 million. The group is forecasting revenue of $500 million next year, with ebitda of $155 million, and ebit of $123 million.