O'Reilly puts NZ Herald up for sale to reduce debt

The global credit crunch has ended Sir Tony O’Reilly’s 20-year love affair with Australasian media.

His debt-laden Ireland-based Independent News & Media (INM) is looking for buyers of its newspapers and radio stations in New Zealand and Australia.

The prize asset is the New Zealand Herald, which Sir Tony’s Australasian vehicle APN News & Media bought in 1996.

The Dublin-based company said it had received "unsolicited offers"for its 39.1% holding in APN [Australian Provincial Newspapers], which also includes a string of regional newspapers in Australia, a half share in two radio networks – TRN (The Radio Network) in New Zealand and ARN (Australian Radio Network) – and a billboard company.

INM owns some of Ireland’s biggest newspapers as well as the unprofitable left-wing Independent in London. INM hopes to raise €800 million ($1.6 billion) from the APN sale to reduce its €1.4 billion of debt to under €600 million.

"The board believes the significant proceeds receivable from monetising its shareholding in APN would substantially enhance INM's balance sheet," INM said in a statement to the Dublin and London stock exchanges at the weekend.

It had received "a number of unsolicited approaches regarding its stake in APN and believes it is now in the best interest of INM shareholders to consider its strategic options."

The announcement comes at a time when APN shares have more than halved in value. From a high of $A5.85 in January they closed on Friday at $A2.41 in Sydney and $2.85 on the NZX.

INM said in the statement that this "does not reflect the inherent value of the underlying assets and the position of APN as a leading media company in Australia and New Zealand.

"Moreover, this strategic value has not been fairly reflected in INM's share price, due primarily to the fact that INM doesn't fully control APN's cash flows," it said.

Less than two years ago APN's shareholders rejected a $A3.8 billion takeover bid by Sir Tony and his private equity backers Providence Equity Partners, which valued APN's shares at $A6.20 apiece.

Even at the current share prices, a buyer would have to be prepared to stump up around $1 billion, as under ASX and NZX rules the purchaser of more than 19.9% of a listed company must then bid for the remainder (unless the stake is bought with shareholder approval) meaning APN could be privatised or merged with an existing media group.,

London’s Daily Telegraph reports fellow Irishman Denis O'Brien, who has built up a 26% stake in INM, has been scathing of the decision to sell a profitable business in a poor market.

"I find it hard to understand why they are considering the sale of one of the group's best-performing assets in a falling market," he said.

"I, like all shareholders, shall be watching closely to see what valuation can be achieved for this attractive asset."

Mr O’Brien has been vying for control of the company with Sir Tony, who has increased his personal stake to 28%.

News of INM's likely debt repayment boosted its shares 28% over the weekend – their biggest gain since January 1987.

INM also told the market its total revenues and profits would be lower in 2008 while the "current volatile nature of global financial and economic markets make it extremely difficult to reliably forecast for 2009 at this early stage."

But it said it would reduce costs, and its British papers The Independent and The Independent on Sunday were considering sharing costs with other British papers.

Mr O’Brien has pushed for the sale or closure of these titles, which have never made a profit.