Nine Entertainment Raises A$643 Million in Amid IPO Rush

Nine Entertainment Co. and its owners plan to raise about A$643 million ($582 million) in Australia’s second-biggest initial public offering this year as first-time share sales in the country surge.

Nine will sell shares at A$2.05 apiece, the low end of a marketed range, and will have a market capitalization of A$1.93 billion, the Sydney-based company said yesterday in an e-mailed statement. The broadcaster marketed shares at A$2.05 to A$2.35.

The value of Australian initial public offerings announced in November was A$3.2 billion, more than the previous 22 months combined, according to data compiled by Bloomberg. Record-low interest rates and a glut of cash in investment funds are driving demand for new stocks, CIMB Holdings Bhd. analysts Shane Lee and Andrew Tang wrote in a Nov. 29 note to clients.

“We’re moving to a point where you’re just not getting the sort of returns that you are used to” from existing listed companies, Tang said by phone. “We’re seeing a lot of funds hold back and look to invest in IPOs instead.”

Apollo Global Management LLC, Oaktree Capital Group LLC and other funds took control of Nine last year in a debt-for-equity swap that saw previous owner CVC Capital Partners Ltd. lose the majority of its investment.

The television broadcaster, which also owns a ticketing business and the country’s largest indoor music venue, earlier this year bought an affiliate station in Western Australia state and Microsoft Corp.’s 50 percent stake in the Mi9 joint venture.

Strong Demand

The IPO values Australia’s second-largest media company at about 8.3 times estimated earnings before interest, tax, depreciation and amortization for the 12 months through June 2014, including debt, according to the statement. Nine shares will start trading Dec. 6.

“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,” Chief Executive Officer David Gyngell said in the statement.

Nine forecast sales of A$1.57 billion for the year ending June 30, 2014, and Ebitda of A$305 million, according to the prospectus. The company estimated net income of A$139.5 million, from A$136.7 million in the previous 12 months.

Digital Assets

The broadcaster’s digital businesses, including the NineMSN web portal, provide it with better prospects to lift earnings compared to Australia’s other publicly traded broadcasters, whose non-television units are focused on newspapers, magazines, and billboards, said Peter Esho, chief market analyst at Invast Financial Services Pty. in Sydney.

Its digital and events businesses, which account for 21 percent of group sales, saw revenue rise 11 percent from a year during the 2013 financial year, according to the company’s share prospectus. Sales at Seven West Media Ltd.’s non-television units fell 12 percent while those at Ten Network Holdings Ltd.’s outdoor advertising unit dropped 5.4 percent.

“There’s a great opportunity with Nine, particularly their digital assets,” Invast’s Esho said by phone. “The free-to-air business will provide a base, and I think the upside will come from the digital media side.”

New Listings

Oaktree will cut its stake to 14.3 percent from 27.8 percent while Apollo’s holding will be reduced to 22 percent from 25.6 percent as part of the IPO. Other funds that are among Nine’s owners will trim their collective holding to 30.2 percent from 46.5 percent.

Apollo and Oaktree are among private equity firms taking advantage of the rising valuations to sell Australian businesses. The country’s benchmark stock index reached a more than five-year high on Oct. 28 and is up 16 percent in the past 12 months.

Pact Group Holdings Ltd., the closely-held packaging maker controlled by Raphael Geminder, will start trading Dec. 17 after raising A$649 million in its initial share sale. Travel insurance provider Cover-More Group Ltd., controlled by Crescent Capital Partners Ltd., plans to raise A$521 million in an IPO later this month.

KKR & Co.’s Bis Industries Ltd. scrapped plans for an initial public offering last week, citing “unfavorable market sentiment” toward resources stocks. The mining services company marketed the IPO last month to raise as much as A$510 million, two people familiar with the matter said Nov. 11.

Restructuring Plan

Under the restructuring plan agreed last October for Nine Entertainment, about 60 percent of a A$5.75 billion debt and equity investment by CVC was wiped out. Senior lenders including Apollo and Oaktree received A$573 million in cash and a 95.5 percent stake in Nine, according to Federal Court documents in December. London-based CVC had bought the broadcaster from billionaire James Packer’s Publishing & Broadcasting Ltd.

Gyngell will receive a A$2.5 million cash bonus for completing the IPO and 4.55 million shares, according to the prospectus. The broadcaster will also issue 4.9 million shares to non-executive directors and another 1.1 million shares to employees. It will have a total of 931 million shares.

UBS AG, Morgan Stanley, Macquarie Group Ltd. and Commonwealth Bank of Australia are among banks leading the share sale, according to the prospectus.

Los Angeles-based Oaktree, the world’s biggest investor in distressed debt, in September took control of Australia’s Billabong International Ltd. together with Centerbridge Partners LP after the funds won approval for a plan to refinance the surfwear maker’s debt.

Apollo, the private-equity firm run by Leon Black, is on track to raise $15 billion for a new buyout fund, the largest since Blackstone Group LP raised $21.7 billion in 2007, people with knowledge of the matter said Oct. 7.

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