KEY POINTS:
The bid by Sir Anthony O'Reilly's Independent News and Media (INM) to privatise Australasian media company APN looks set to face resistance from key shareholders.
INM, backed by private equity companies Carlyle and Providence, is offering A$6.05 a share for the 59 per cent of APN it does not already control.
That gives APN, publishers of the Herald, a value of about $4.2 billion.
But some shareholders are not impressed with the offer.
Yesterday Ross Barker, the managing director of the Australian Foundation Investment company and Djerriwarrh Investments - both among APN's top 10 shareholders, but with a combined shareholding of less than 2 per cent - said he could see no compelling reason to accept.
"As a long-term investor in APN we've been very pleased with the returns we've had from it," he said.
"We have to pay tax when we sell and then we have to find something else to invest the money in. To be persuaded to part with it, [the offer] would need to be considerably more."
The proposed deal would be done using a scheme of arrangement, which means a shareholder vote and approval of 75 per cent is required for the sale to proceed.
Barker said he expected INM would be excluded from that vote, increasing the power of other shareholders.
Earlier this week John Sevior - head of Australian equities at Perpetual which is the largest shareholder outside of INM with a 14.8 per cent stake - told Australian media that the offer looked to be at the low end.
Another large shareholder, fund manager Maple Brown and Abbot which has an 8.1 per cent stake, declined to comment yesterday.
Merrill Lynch analysts have suggested the bid may have to be raised to A$6.50 a share to succeed but APN shares dropped A4c on the ASX yesterday to close near the offer price at A$6.06.
That may be due to media reports which indicated that the bid was not likely to be increased.
Deutsche Bank analyst Andrew Anagnostellis described the bid as "unusual" given that it is below the current market price and only marginally higher than an earlier unsuccessful bid - believed to be A$6.02 - which INM made in October.
That bid failed when one of the private equity backers pulled out.
But APN shares are still well ahead of the A$5.40 at which they were trading before news of INM's original privatisation proposal in October.
The APN board is expected to decide in the next few days whether the offer is worthy of going to a shareholder vote.
Anagnostellis said that despite the offer being below the market price, the board might find it difficult to reject because of the lack of a rival bidder and because the implied acquisition multiple was in line with similar transactions.
