Australian TV network Nine Entertainment appears ready to provide some returns for its new owners as it prepares to launch an initial public offering on the Australian stock exchange Friday.
The Apollo Global Management- and Oaktree Capital Management-owned business has now priced its IPO at A$2.05 (€1.36; $1.85) per share, noting strong interest from investors.
Nine fell into the hands of its senior lenders Apollo and Oaktree in October last year, when CVC Capital Partners, its private equity owner since 2006, ceded control of the company in a $3.4 billion debt-for-equity swap that saw CVC lose about A$1.9 billion – Asia’s largest ever private equity loss. Subsequently, some senior executives departed CVC.
CVC’s Asia-Pacific unit acquired Nine from media mogul James Packer at the top of the market in 2007, in a two-stage deal worth A$5.6 billion. Despite a reported cash injection worth A$1.9 billion between 2007 and 2008, interest payments were swallowing most of the Nine’s cashflow, Private Equity International reported earlier.
The company’s substantial debt load was due to be repaid or refinanced in February 2013, precipitating the talks with lenders that culminated in the deal.
Apollo and Oaktree are now expected to see a return from the company, which is widely-noted as a good business despite the downturn in Australia's media sector.
“We are delighted by the strength of demand received for our IPO across both high quality domestic and international investors, with the offering multiple times covered at the final price. I look forward to welcoming our new shareholders,” Nine chief executive, David Gyngell, said in a statement.
The successful launch will further indicate that Australia’s capital markets are open to private equity investors with portfolio companies ready to exit.
This week, Dick Smith, an Anchorage Capital Partners-owned electronics retailer, also launched its IPO on Australia’s stock market, which raised A$315 million, media reports said earlier.
However, both Dick Smith and Nine were priced at the bottom of their ranges, indicating that the buoyancy of Australia’s stock market is limited.
Nine’s price range had been set between A$2.05 and A$2.35 per share, with the total amount potentially raised by the offer will be between A$643.4 million and A$697.3 million. Dick Smith had expected to raise up to A$344 million.
Whilst industry sources have highlighted the opening of Australia’s IPO markets as one of the successes of this year, offering confidence to private equity firms, some remain cautious.
“There is a level of cautiousness that still exists about whether or not the momentum that we’re starting to see build at the moment will continue and deliver on-going strength in the market-place over the next few years or whether it is a short-term improvement in the economic outlook that may be disrupted by a major shock,” Yasser El-Ansary, chief executive of the Australian Private Equity and Venture Capital Association (AVCAL), told PEI.
Moreover, while IPOs are increasing, private equity firms should still strongly consider trade sales when exiting their businesses, El-Ansary added.
“Whilst there is a significant level of focus at the moment on IPOs, we musn’t forget that improvements in the outlook for business and consumer confidence means the market for trade sales should pick up as well. So PE funds and their managers looking to make those decisions about divestment are in a position where they can look at both options.”
Moreover, trade sales continue to dominate Australian private equity exit routes, as a recent AVCAL and Ernst & Young report showed. Trade sales accounted for the largest number of exits by private equity this year (41 percent), although private equity backed-IPOs rose to their highest levels in five years.