Seven Network to snap-up Prime shares

SYDNEY - Prime Media Group plans to raise up to A$110 million ($135.3 million) from a share issue, with Kerry Stokes' Seven Network set to buy about A$25 million.

The regional broadcaster says the proceeds of the capital raising will be used to pay down debt and strengthen the company's balance sheet.

Seven Network is committed to subscribe for up to 14.9 per cent of Prime's expanded capital base through its wholly owned Network Investment Holdings vehicle, worth up to about A$25 million.

Paul Ramsay Holdings, Prime's major shareholder, has committed itself to another A$25 million.

Prime chairman Paul Ramsay said the funds raised would position the company to weather the tough economic environment.

"The equity raised will be used to pay down debt and strengthen Prime's balance sheet and, along with a cost management programme currently being implemented, in my belief puts us in a position to weather the current economic environment," he said.

Prime said the A$110 million raising would comprise a 10-for-7 renouncement pro-rata entitlement offer at a price of A48c per new share and a placement of shares to Seven, also at A48c a share.

Prime shares last traded at A60c, before entering a trading halt on Monday.

Prime said it had received agreements to subscribe for new shares totalling in excess of A$85 million from Paul Ramsay Holdings, Seven and a small number of Prime's major institutional investors.

In a business update, Prime said the operating environment was challenging. It said its television operations continued to benefit from alignment with the Seven programme schedule but that its TV cost base was being affected by the rollout of digital and increased programme charges.

Prime said its radio network costs were expected to fall significantly with the centralisation of operations.

"Prime remains committed to reducing operating costs significantly where possible, and constraining cost growth in outsourced services," it said.

Prime said it had a total debt of A$297 million at December 31, 2008.

Seven's investment in Prime comes after a series of investments by the company in recent months.

Seven said last month it had A$1.38 billion in cash left over from the sale of half its television and magazine assets to private equity firm Kohlberg Kravis Roberts in 2006.

It also said last month that the carrying value of its listed securities stood at A$417 million.

Stokes said at the time that Seven was seeking acquisitions and would prefer to buy in the media area, but would not be restricted to that sector.

- AAP