KEY POINTS:
Perpetual Investments will not sell its blocking stake to the takeover bid for APN News & Media, but is indicating it may be open to overtures from Sir Anthony O'Reilly and his private equity partners.
However, O'Reilly's consortium has made a "final offer" so there appears to be little it can do to rescue a vote for the scheme of arrangement that would take the New Zealand and Australian media company off the public share register.
O'Reilly's push to privatise APN looks doomed to failure.
Perpetual Investments, a fund manager that holds 13.4 per cent of the stock and 11.7 per cent of the voting rights in APN News & Media, issued a statement to the Australian Stock Exchange yesterday.
"Perpetual advises that provided there is no change of circumstance its current intention is to vote against the scheme of arrangement of APN," it said.
APN News & Media asked what that meant and Perpetual issued a clarification, saying it intended to vote against the scheme of arrangement if there was "no material change in circumstances".
It is understood APN sees the "material change in circumstances" reference as implying that Perpetual will not support the scheme unless the A$6.20 offer is increased.
But it is unlikely the consortium of O'Reilly's Independent News and Media and US private equity firms Carlyle Group and Providence Equity Partners could increase the price, even if it wanted to.
The consortium initially offered A$6.01 a share, then A$6.05. It then made a formal offer in January of A$6.10 a share.
Still facing shareholder resistance - most publicly from Perpetual Investments - the consortium increased its offer in April to A$6.20 and told the Australian Stock Exchange that was its "final price".
Under ASX rules, once a "final offer" has been made, the acquirer cannot come back with a new offer under the existing scheme.
To succeed, the current scheme needs votes from 75 per cent of the shareholding not owned by O'Reilly and other consortium members - that is, 75 per cent of about 60 per cent.
Perpetual's 13.4 per cent of the stock gives it almost enough shares to block the takeover on its own.
Another fund, Maple-Brown Abbott, has 7.5 per cent and has also been reported as being against the deal.
This suggests the privatisation will be dead in the water at a Friday meeting at which shareholders will vote on the scheme.
APN's share price fell A20c to A$5.78 yesterday.
Perpetual's investment manager, John Sevior, has been vocal about the takeover bid, saying the earlier offers were inadequate.
The increase to A$6.20 prompted speculation about whether the consortium had been given an indication that the extra money would overcome resistance.
A spokesman for the O'Reilly consortium could not be reached yesterday, but APN News & Media chief executive Brendan Hopkins has said that if the change did not go ahead the company would continue to trade as it had done.
The most immediate effect will be to remove the cash dividend that INM would have obtained from privatising the firm.
It is understood that under the proposal INM had planned to run the company under its present management and retain 35 per cent of shares and 39.3 per cent of voting stock.
When the offer was at A$6.05, debt was to have been increased from A$660 million to A$2.3 billion, giving INM cash to invest in the Northern Hemisphere.
While plans might have been overwhelmed by events such as the increase of A15c a share, a source at the time said that the deal was not built on expectations of cost savings.
APN News & Media's daily newspapers in New Zealand include the NZ Herald, the Rotorua Daily Post, the Bay of Plenty Times, Hawke's Bay Today and the Wairarapa Times Age.
It also owns community newspapers in Auckland and Wellington as well as 50 per cent (with Clear Channel Communications) of the Radio Network including Newstalk ZB, Radio Sport and Classic Hits.
