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The consortium trying to take over APN News & Media has increased its offer by 10 cents a share, effectively giving investors an ultimatum to sell or face a slump in the media company's shares if the deal falls over.
The consortium, led by Sir Anthony O Reilly's Independent News and Media, yesterday increased its bid to A$6.20 as a "final offer" after facing resistance from investors who thought its offer too low.
Under Australian financial rules, a "final" offer means the company cannot make a higher offer during the current takeover bid.
INM and its partners at Providence Equity Partners and Carlyle Group want to privatise the company under a deal in which INM would retain a stake of 39.3 per cent, only 2.7 per cent below its current level.
In the new structure, APN would take on a big increase in debt, and INM would receive a cash dividend.
Attention will now turn to the two Australian investment firms with the biggest stakes in APN - Perpetual Investments with 14.8 per cent and Maple-Brown Abbott with 8.13 per cent.
Perpetual has led resistance to the offer. Its head of equities, John Sevior, said in February "it certainly doesn't interest us".
Yesterday Perpetual fund manager Matt Williams refused to comment on whether the fund was likely to accept the increased bid.
The offer is built around a scheme of arrangement that will require support of 75 per cent of shares not held by Independent, Carlyle or Providence, giving Perpetual just enough of a stake to block the bid on its own.
The chairman of the independent directors at APN, Ted Harris, said yesterday some shareholders had indicated they were unwilling to sell at $6.10.
He understood there had been indications from shareholders that the 10 cent rise would alter their approach.
He said the A$6.20 offer - a multiple of 13.1 on adjusted earnings before interest, tax deprecation and amortisation - was a last opportunity for shareholders to sell at a price buoyed by takeover expectations. The shares closed yesterday at A$6.04.
A source familiar with the buyers' proposal said all three parties to the consortium had struggled with the 10 cent rise.
It is understood that independent advice to shareholders on the scheme of arrangement suggests that if the deal falls over, the shares could fall to the A$5.50 mark. It is is not clear yet whether the increased offer is a last-ditch effort to convince Perpetual and Maple-Brown Abbott to sell, or whether the investors have already indicated that they would sell at A$6.20.
JP Morgan Australia media analyst Rebecca Michelle said the increased offer would probably be enough to ensure the takeover bid succeeded.
"If we look it from a valuation standpoint, the price looks to be reasonable and fairly full and the likelihood of a competing bid given that Independent News is such a majority shareholder is pretty low," she said.
"If the institutional shareholders don't support this revised bid, then they run the risk that the bid goes away and then the share price falls back below A$6."
Michelle said JP Morgan analysis found the consortium would have been able to pay up to A$6.30 a share and still generate the economic return required to pay off debt for the acquisition.
The A$6.20 price was an "adequate compromise".
Shaw Stockbroking senior analyst Greg Fraser said the increased offer was a reasonable price, "so there's a reasonable chance that it could be successful".
The APN board is again recommending investors accept the offer and shareholders will now be asked to vote on the offer at a meeting in late May.
In New Zealand, APN owns the New Zealand Herald and regional newspapers. It is also in a joint venture with the the US radio company Clear Channel Communications in ARN, which in New Zealand owns The Radio Network with half the country's commercial radio stations.
Takeover offer
* APN News & Media includes the New Zealand Herald and regional newspapers and a 50 per cent share of a joint venture that owns half the country's commercial radio stations.
* A consortium headed by Sir Anthony O'Reilly with private equity companies Providence Equity Partners and Carlyle Group has increased its takeover offer by A10c to A$6.20 a share.
* The offer values the company at A$3 billion.
