UPDATE 2-Australia's Nine raises $577 mln in closely watched IPO

Wed Dec 4, 2013 4:45am EST

* IPO priced at A$2.05 a share, bottom end of A$2.05-2.35 range

* Raises A$631 million, making it second-largest IPO behind Pact

* Prices Nine at a multiple of 8.3 times EBITA

* Listing scheduled for Friday

By Jackie Range

SYDNEY, Dec 4 (Reuters) - Australia's Nine Entertainment Co Pty Ltd , saved from going into receivership by two U.S. private equity funds a year ago, raised A$631 million ($576.45 million) in the country's second-largest initial public offering this year.

Nine's market debut in Sydney on Friday will be a litmus test for a rebounding Australian IPO market that remains wary of share offerings by businesses backed by private equity.

Many in the market are still scarred by the 2009 listing of department store company Myer Holdings Ltd by private equity firms TPG Capital and Blum Capital. Myer is yet to trade above its A$4.10 issue price.

Investors say they are worried a poor market debut by Nine could blow the bottom out of the market for private equity investors at a time when others are eying the exits.

Sydney-based private equity firm Crescent Capital Partners is seeking to cut its shareholding in insurer Cover-More Group through an IPO.

"You always have the sense with Australia that we are just one private equity disaster away from returning to a frozen IPO market," said a general partner at a firm which does buyouts in Australia, declining to be identified.

Hostility to private equity runs much higher in Australia than elsewhere in the Asia-Pacific region, with funds regularly attacked in the mainstream press and characterised as vultures, said the general partner, who is not authorised to speak to the media.

Nine's listing comes about a year after the media and entertainment company avoided receivership with Oaktree Capital Group and Apollo Global Management taking control in a more than $3 billion debt-for-equity swap.

Nine priced its IPO at the bottom of its marketing range of A$2.05 to A$2.35 a share, giving the company a market capitalisation of A$1.9 billion.

The amount raised puts it behind packaging company Pact Group, which raised A$649 million with shares priced at A$3.80 each. Pact is scheduled to list on Dec. 17.

The IPO prices Nine at a multiple of 8.3 times earnings before interest, tax, depreciation and amortisation, the company said in a statement on Wednesday.

By comparison, Seven West Media Ltd, which owns rival Seven TV Network, is currently trading on a forward price earnings multiple of 9.74 times, according to Thomson Reuters data.

"Nine is a solid business, well-run business that has medium-term challenges like all old media, but perhaps not as bad as some others," said Matt Williams, head of equities at Perpetual, which has been allocated shares in the IPO.

Revenue rose to A$1.49 billion in the year to June from A$1.39 billion in the previous year, a pro forma consolidated income statement in Nine's IPO prospectus shows. Key in the gain was an increase in advertising revenue share in Nine's television business Nine Network, the firm's largest division.

But overall earnings before interest and tax declined to A$250.1 million from A$270 million. An increase in expenses at Nine Network, including the cost of broadcast rights for the 2012 Summer Olympic Games, contributed to the fall in profit.

NINE LIVES

Chief Executive David Gyngell said in a statement that Nine was "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."

Nine's IPO is the latest incarnation for a business which was responsible for Asia's biggest ever private equity loss after its previous owner CVC Capital Partners put too much leverage into the business and market conditions turned bad.

CVC lost A$1.8 billion and has essentially pulled out of Australia, now merely managing their investments rather than doing new deals.

Mezzanine debt holders led by funds managed by Goldman Sachs also lost most of the A$975 million they had deployed. After the restructure, mezzanine lenders got 4.5 percent of the company, which was worth just over A$100 million.

Apollo and Oaktree acquired the company's debt in secondary loans trades, accumulating big positions and eventually forcing CVC out through a debt-for-equity swap.

After Nine's listing, Oaktree's holding in Nine will drop to 14 percent from 28 percent and Apollo's to 22 percent from 26 percent.

Others looking to the market include Cover-More Group, which is seeking to raise A$521.2 million in an IPO, with Crescent Capital reducing its shareholding in the company to 13 percent from almost 83 percent.

Cover-More's stock is expected to begin trading on the Australian Securities Exchange on a conditional basis on Dec. 19.

Upping the tension, KKR & Co last month called off a planned A$500 million IPO of mining services firm Bis Industries Ltd amid negative sentiment for companies exposed to the resources sector.

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