The latest results from APN News & Media must have come as a shock to the poor souls who own the company, as against Independent News & Media which has a controlling 45 per cent stake.
Last December, the shareholders who own the other 55 per cent gave their approval for the takeover by APN of Wilson & Horton, the New Zealand subsidiary of Independent News & Media. They were told that the complex deal would be earnings-enhancing thanks to a convoluted masthead licensing arrangement.
Without this licensing agreement, the deal would be "moderately earnings per share positive prior to allowing for goodwill amortisation", according to the prospectus sent to APN shareholders.
With the licensing deal taken into account, the takeover would boost earnings per share in 2002 from a forecast 18.7 Australian cents to 21.1 cents, according to the document. This projection now seems a little optimistic following last week's results when APN reported that earnings at the halfway point were flat at 8.4 cents. The improvement in advertising referred to by Mr Gavin O'Reilly, the chief operating officer at Independent News & Media, will need to be pretty substantial before these targets are met.
As the largest shareholder in the Australian group, Independent News & Media is no doubt as disappointed as the other investors in APN that the takeover has yet to deliver. However, Mr O'Reilly and his father Sir Anthony will be able to draw some consolation that they did get €690 million for Wilson & Horton. The price paid to Independent included a significant premium for control of the New Zealand company, even though Independent was retaining control - albeit indirectly - through its domination of the APN board. The money was most welcome as it freed up €220 million in cash to pay down the group's heavy debt load.
The cherry on the cake was that through a departure from standing accounting rules, Independent News & Media was able to book a €32.5 million profit on the deal and stave off a loss, after tax and financing costs, for the year of €29.2 million.
