Media Profits, Deals

By Glenn Dyer | More Articles by Glenn Dyer

Media companies will dominate the news over the next couple of days with the likes of Seven Network (today) and PBL (tomorrow) reporting.

Prime TV, the regional affiliate of Seven, produced its interim yesterday with earnings after tax rising 23 per cent to $16.1 million (including one off items). Earnings before interest and tax from continuing operations were up a more modest 4.2 per cent to $26.62 million from $25.55 million in the first half of the 2006 year.

That was on revenue up 9.6 per cent for advertising (to $97.3 million) and 9.2 per cent for the group as a whole to $101.53 million.

Interim dividend was increased to 7.5c from 6.5c. Dividends per share were 12.9c compared to 10.5c.

The result in the first half of last year was influenced by the $3.3 million loss on the company’s exit from New Zealand.


Yesterday James Packer’s PBL Media made its first move since it was established at the start of this month with CVC Asia, offering to buy the poorly performing Nine Network station in Perth from Sunraysia TV for $136 million.

The deal will raise the question whether PBL media may be interested in buying the Adelaide station, NWS 9 from Southern Cross and perhaps NBN from SP Telecom.

There is a rule preventing a TV network from reaching any more than 75 per cent of the Australian population directly but the rival Seven Network controls stations in all the five major metro markets and has its wholly owned regional business in Queensland.

Sunraysia TV, which operates STW 9, asked for a trading halt before the market opened yesterday and then PBL Media revealed its hand a little later in a deal that has been speculated upon for the past two months.

PBL Media will do the deal by buying the operating subsidiary, licence and assets from Sunraysia, which is controlled by the chairman, Eva Presser and associated interests, with Bruce Gordon’s WIN regional Media group a significant minority shareholder with almost 44 per cent, but no power.

Sunraysia proposes a two stage buyback of all shares in STV using the PBL Media money. The shares were trading around $13.50 yesterday with a market capitalisation of $154 million

Sunraysia’s chairman justified the deal by saying: “Putting Swan TV together with Nine Network will provide improved programming for our viewers, improved ratings for our advertisers and operating benefits for the business. In today’s new media landscape, one needs the critical mass to meet the demands of a highly competitive local and national media market. The Nine Network can provide this whereas a standalone independent can not. The sale also provides an opportunity for Sunraysia to realise value on its investment.”

STW 9 has underperformed for years and Eva Presser hasn’t been interested in selling, especially to Bruce Gordon and WIN which has made at least one recent approach.

Gordon can block this but why would he antagonise PBL and James Packer who are his most important business partners?

But it does raise the question why now? Nine and Sunraysia have been negotiating a new affiliate agreement for months now without success.

PBL and Southern Cross settled a new agreement for NWS-9 in Adelaide last year (the agreements were needed post the loss of the AFL broadcast contract by Nine).

Nine and PBL controlled the network but for some reason couldn’t get Perth to lift its game: a sign of managerial weakness. So it would seem they have decided it’s cheaper to spend some of the $4.5 million raised in the CVC deal last.

The deal will give the Nine Network more bulk, but Perth is currently losing money and will do so for a while yet after the purchase goes through.

There will significant cost cutting and it will be run as an adjunct of Sydney but with local news and A Current Affair, and a local sales team. That’s sort of what it has now, but the cuts will make even leaner.

The company said Completion of the Sale under the Share Purchase Agreement is subject to a number of conditions with the key condition being that the shareholders of Sunraysia approve the sale under Chapter 11 of the ASX Listing Rules, as Swan TV is the main undertaking of Sunraysia.

The proposal will be put to shareholders at a general meeting to be convened by Sunraysia in late March/early April 2007

Sunraysia says it has agreed to a break fee of $1.3 million, which is a bit outrageous as there will not be an overbidder: PBL Media controls the Nine Network and no one else would think of trying to upset the deal because it would need the approval of PBL Media and James Packer!

Sunraysia proposes to offer to buyback all the shares “to distribute the proceeds of the Sale”.

In reality that’s a takeout offer for WIN and Bruce Gordon. They would feel they are entitled to 44 per cent of the $136 million, or around $59 million, which would give a nice profit on the holding.

But not all the $136 million will be paid straight away: $5 million of the purchase price payable “will be held in a warranty escrow account until 30 September 2008 and $10 million in a tax escrow account until 30 June 2012, or an earlier date during calendar year 2007 with the agreement of PBL Media”.

The purpose of the escrow accounts is to reserve, for a period, funds for any agreed claims by PBL Media for a breach by Sunraysia of warranties under the Share Purchase Agreement.

“As a consequence of this delayed release of the full purchase price to Sunraysia, shareholders who accept the Buy-Back offer will receive payment in two or more instalments.

“The first instalment will be paid shortly after the close of the Buy-Back and the subsequent instalments (if any) will be paid as soon as practicable following release of the escrowed funds. The value of the follow-on instalments will depend on the balance of the escrow account.”


About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

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