INDEPENDENT Newspapers is set to embark on the biggest acquisition in its history, making a £442 million bid for the Wilson & Horton newspaper group in New Zealand. It already has a 22.6 per cent stake in the group and now wants to buy the remaining shares.
If the acquisition is successful, it will transform Independent and its net assets would increase by over 50 per cent to £572 million. Wilson and Horton (W&H) is likely to be Independent's main vehicle for expansion into the Pacific Rim countries, where the New Zealand company already has a foothold. Around 38 per cent of Independent's turnover will come from New Zealand after the acquisition, compared to 30 per cent from Ireland.
Independent holds its 22.6 per cent stake in W&H through the Independent Press joint venture, so the net cost of buying the remaining shares is £336 million. The Irish market reacted enthusiastically to the proposed acquisition, which Independent says will add marginally to earnings in year one. The shares jumped 11 3/4p to 307p.
Independent has offered the other W&H shareholders which includes the 22.6 per cent held indirectly by the O'Reilly family trust - the option of NZ$10.70 (£4.60) in cash or taking a mixture of cash and preference shares in Independent Press Communications Limited (IPCL), the vehicle being used for the W&H acquisition. The NZ$10.70 offer price compares with NZ$9.70 at last Friday's close.
Independent has put in place a £400 million syndicated loan through Bankers Trust which will meet the cost of the acquisition paying off some existing W&H debt and for working capital.
Independent director, Mr Brendan Hopkins, said: "We believe that it's a fair offer. We thought about it long and hard." Asked why Independent had chosen now to make a full scale bid for W&H, Mr Hopkins said: "We have 45 per cent for some time, we've got to know the company well, but a partial investment is never as good as full ownership."
The initial reaction from local analysts, however, was cautious with SBC Warburg's John Rowley commenting: "I think most New Zealand shareholders will be cautious sellers. They'll want to see the details before they do anything . . . I think you'll see a lot of people now scratching their heads on the numbers waiting to see what the independent directors' report says.
About 20 per cent of the outstanding shares are held by institutional investors with the balance held by small investors. Most of the original family interests in W&H have sold shares to the Independent O'Reilly family trust joint venture in the past year.
The independent W&H directors issued a brief statement urging shareholders not to sell, and the board has two weeks with its response which is expected to include an independent evaluation on W&H. Under New Zealand law, the Independent offer will formally come into effect on October 8th.
Independent has until November 8th to secure the 90 per cent acceptances to allow it to declare its offer unconditional or else the offer will lapse. Mr Hopkins would not be drawn on whether Independent will make an increased offer if its current offer does not get sufficient acceptances to be declared unconditional. As yesterday's take over bid was lodged when most of New Zealand was in its bed, more detailed reaction was due to come as the local stock market opened late last night.
If the offer is accepted by W&H shareholders and there is a full take up of the share alternative, Independent's net debt would rise from £164 million at end 1995 to £370 million, a gearing of around 100 per cent. Independent, however, has always maintained that interest cover and cash flow is a more appropriate gauge and on this basis, Independent can comfortably accommodate the W&H acquisition. Total assets will rise from £644 million to £1.08 billion and net assets from £376 million to £572 million.
