Apollo, Oaktree to sell down shares in Nine(2)

The troubled Australian television channel is seeking a A$670m IPO on the Australian stock exchange after it was taken over last year in a $3.4bn debt-for-equity swap.

Australia’s Nine Entertainment Channel, which hosts popular TV shows such as The Today Show, The Voice and National Rugby League programmes, is planning an initial public offering of shares on the domestic stock exchange worth up to A$670 million (€470 million; $635 million), according to a prospectus released by the company. 

The offer includes A$275 million worth of new shares and the sale of A$395 million worth of existing shares, assuming the final price is in the mid-point of the indicative price range. 

The price range has been set between A$2.05 and A$2.35 per share, with the final price expected to be determined the first week of December. The total amount potentially raised by the offer will be between A$643.4 million and A$697.3 million.

Previously owned by private equity firm CVC Capital Partners, Nine changed hands in October 2012 after a substantial debt-load and a loss-making magazine business helped prevent the company from repaying its debts. 

Last October, CVC ceded control to its senior debt lenders Apollo Global Management and Oaktree Capital Partners in a $3.4 billion debt-for-equity swap, which represented a $2 billion loss for the private equity firm – the biggest ever in the Asia Pacific region, Private Equity International reported

We believe this is an outstanding outcome for all stakeholders.  The business has great momentum and strong cash flow, and now it will have the strongest balance sheet in the industry.

Peter Bush, chairman, Nine Entertainment, in a past statement

earlier. 

Now, Oaktree and Apollo hold 28.8 percent and 25.6 percent of Nine respectively, which will dilute to 14.3 percent and 22 percent after the proposed IPO, according to the prospectus. The directors do not expect any one shareholder to control Nine on completion. 

The capital raised by the offer is expected to repay the debt drawn on the company’s debt facilities, as well as provide the company with more liquidity and add additional flexibility to the business in terms of its growth strategy and access to capital markets.

Despite the company’s burdensome debt package, Nine has a strong balance sheet and was a good business, albeit in a struggling media market in Australia, according to Peter Bush, Nine chairman. 

Bush said, following the Apollo and Oaktree debt-for-equity swap last year, “We believe this is an outstanding outcome for all stakeholders. The business has great momentum and strong cash flow, and now it will have the strongest balance sheet in the industry. It puts the company in a remarkable position to build on the successes of 2012.”

Kohlberg Kravis Roberts has also been invested in Australia's media sector through its former portfolio company Seven West Media. In May, the firm sold its 12 percent stake in the business for A$265 million due to fund term and currency pressures. The fund KKR made the investment from is nearing the end of its life, while Australia's currency has continued to strengthen over recent years and was on par with the US dollar at the time KKR sold. 

KKR expected a “net positive” from the investment, despite Seven Media being one of many media companies that suffered from the broad pull-back in advertising from Australian TV networks, a source familiar with the deal told PEI earlier.