Rupert Murdoch's News Corp buys APN regional papers for $37 million
APN News & Media has sold its regional newspaper business to its own shareholder, News Corp, for $36.6 million. However, major shareholders have expressed surprised at the price, given it was only two times annual earnings.
APN’s shares reached $4.90 on the news and closed at $4.75. APN recently completed a share consolidation that reduced the shares on the market from 1.3 billion to 196 million. The shares were this week using a temporary ticker code APNDA, and would revert to APN on June 23.
APN chief Ciaran Davis said the remaining radio and outdoor media were terrific for advertisers. Photo: Louie Douvis
But it remains to be seen if shareholders approve the deal, with the managing director of 16 per cent shareholder, investment firm Allan Gray, saying he was surprised at the bargain price.
“I am very surprised at the price. It does seem very low,” Simon Mawhinney told BusinessDay.
“I have been led to believe there is a competing bid and it is likely to be around the $50 million level and were that the case, we would certainly not vote in favour. Even in the absence of a competing bid I would be intrigued why two times EBTIDA is the right price for this asset”.
Mr Mawhinney said this position was based on all the information available to shareholders.
The $36.6 million price was significantly lower than the $65 million suggested by media reports in May. APN declined to comment on the value of the deal.
The regional assets include 12 daily newspaper, 60 community newspapers and dozens of news websites. Last financial year ARM earned $18.4 million from the papers and websites, a 27 per cent decline on the previous year.
News Corp already owns a 14.9 per cent stake in APN, which is shedding its traditional media assets but keeping its radio and AdShel divisions.
Executive chairman of News Corp Australia, Michael Miller, said the agreement was “a commitment to vibrant newspaper operations that make strategic sense”. Mr Miller was chief executive of APN News & Media from 2013 until mid-2015, and previously worked as regional director for News Limited.
“The newspapers in the group are some of the strongest regional titles in Australia representing centres like Rockhampton, Mackay, Toowoomba and the Sunshine Coast, and we believe their community-based values are a good fit with News Corp,” Mr Miller wrote in an email to staff on Tuesday.
The deal would be put to shareholders in August. It still requires regulatory approval from the competition watchdog and the Foreign Investment Review Board, because News Corp is headquartered in the United States.
The other bidder was rumoured to be Fetch Plus, a Singapore-based company that uses social media to increase advertising revenue for media companies.
APN chairman said the deal with News Corp was a historic day.
“We are now passing that ownership on to another media group with deep publishing experience across regional Australia,” Peter Cosgrove said in a market announcement on Tuesday.
Chief executive Ciaran Davis said the remaining radio and outdoor media were terrific for advertisers.
“The sectors are growing, they are complementary, and they have both led innovation in the media industry across the digital sector,” he said.
News Corp management said the regional titles’ “community-based values are a good fit with News Corp”.
“We are excited by the opportunity to get to know more members of the ARM team and the newspaper communities they represent,” managing director of metro and regional publishing Damian Eales said.