NZX's rights issue prospectus details the motives behind its $33 million spend-up, which includes the controversial purchase of a rural publisher.

The stock exchange operator has three acquisitions underway: electricity and gas market operator M-Co, a 50.1% stake in Australian stock exchange company NSX and Country-Wide Publications.

The total cost of these is $33.7 million (at current exchange rates, as the NSX transaction is priced in Australian dollars).

To fund them, NZX will take on debt for the first time, via a bank facility, and also use the $20.55 million proceeds from the five for one rights issue.

The total purchase price equates roughly to a full year of NZX’s revenue (based on its 2008 results) and three years of net profit after tax.

It’s also just less than NZX’s entire equity at December 31 of $34.5 million.

NZX says in the prospectus that the acquisition of Country-Wide is consistent with NZX’s strategy to add product lines and synergies to its existing agricultural data and media businesses

“Country-Wide will enable NZX to further tap into the rural sector and ensure that customers are provided with full coverage of price data, analysis, forecasting, news and information from within and beyond the farm gate,” it says.

“The agricultural sector is key to the New Zealand economy. NZX and Country-Wide are aligned in their belief as to the importance of providing market data, analysis and information to assist business decision making….

“Knowledge and skill sharing and the potential to streamline products and recognise cost efficiencies are positive acquisition benefits.”

Country-Wide will stay based in Feilding for the “foreseeable future”.

The purchase has been slated by some as a none-too-subtle attempt to cozy up to farmers and, through the publications, promote NZX’s ultimate goal of a Fonterra listing.

NZX chief executive Mark Weldon has vehemently denied that there will be any issues with editorial independence.

But he did this argument’s credibility no favours when he told the Herald’s Fran O’Sullivan that he’s disappointed to have the independence issue questioned by someone – Alan Robb – who’s now on the NZX payroll.

“In order to realise the benefits of the Country-Wide acquisition, NZX will need to ensure the retention of key personnel and both NZX and Country-Wide will need to maintain the editorial standards and timeliness of publication delivery,” the rights prospectus says.

The prospectus also spells out the risks associated with the NSX buy.

NSX is currently operating at a loss and, according to the prospectus, is thinly capitalised.

“If NSX’s capital status is not addressed, ASIC may take action in respect of NSX’s licence. This could range from more intensive scrutiny of day to day operations; formally placing NSX under ASIC watch, which would be publicly announced; or directly administering or shutting down market operations,” it says.