* IPO priced at A$2.05 a share, bottom end of A$2.05-2.35
* Raises A$631 million, making it second-largest IPO behind
* Prices Nine at a multiple of 8.3 times EBITA
* Listing scheduled for Friday
By Jackie Range
SYDNEY, Dec 4 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
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
"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.
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
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
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.
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