NZME considers buying local Adshel business

NZME is considering buying Adshel's local business for $A156 million after former parent APN News & Media's buy-out of the outdoor advertising business triggered an option for the local media group to buy the assets on the same terms.

Sydney-based APN has signed a deal to buy the 50% of Adshel it didn't already own from Clear Channel Outdoor, giving it control of 22,000 static and digital panels across Australia and New Zealand.

Adshel generated earnings before interest, tax, depreciation and amortisation of $A42 million on revenue of $A170 million in the year ended June 30. The New Zealand arm contributed 22% or $A9.3 million in earnings on sales of $A19.8 million.

APN plans to raise $A273 million through an institutional placement and renounceable entitlement offer to pay for the acquisition, selling shares at a discounted $A2.45 price. However, the New Zealand business, which has 150 digital screens and another 70 planned for the financial year, could get bought by NZME under an option included in the media company's demerger from APN earlier this year.

Auckland-based NZME, which publishes the New Zealand Herald newspaper and operates the Radio Network stations, has one month from the date of completion to make up its mind on whether to exercise the option and a further two months to complete its acquisition if it does, APN says.

The deal's 12.7 times ebitda multiple implies a price tag of $A118.1 million, though APN says the NZME option would generate gross proceeds of $A156 million and the New Zealand company has taken that figure at face value so far.

"NZME will consider this option following the announcement from APN regarding the buy-out of Adshel, but has no announcement to make at this time," chief executive Michael Boggs says.

NZME had cash and equivalents of $NZ13.8 million as at June 30 and could draw a further $48 million on its $160 million banking facilities. However, its proposed $122.2 million acquisition of Fairfax Media's New Zealand assets includes an $55 million cash component and would see the merged media group increase its banking lines by $90 million to $250 million, making the Adshel business a bit of a mouthful.

"If NZME elects to exercise the option and acquires Adshel NZ from APN, APN will consider, and if appropriate having regard to the position of APN at the relevant time, implement one or more capital management initiatives to return excess capital to shareholders," APN says.

APN and NZME have a 12-month non-compete clause, which excludes the New Zealand Adshel business.

NZME's NZX-listed shares were unchanged at 68c, while APN's ASX-listed stock last traded at $A3.38.

(BusinessDesk)