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APN may demerge NZME assets

NZ NewswireNZ Newswire 18/04/2016 Sophie Boot

APN may demerge NZME assets © Twitter/NZME APN may demerge NZME assets APN News & Media could spin off its NZME New Zealand media assets after abandoning an initial public offering for the division in February.

The Australian newspaper, owned by APN shareholder News Corp, reported the media group was expected to pursue an in-specie distribution of NZME shares to shareholders for NZME and would make an announcement at its annual general meeting on May 11.

Shareholders would hold stock in APN and the separately-listed NZME under a demerger, the report said.

A spokeswoman for APN told BusinessDesk the company was still considering its strategy for NZME.

"As we communicated at APN's 2015 full-year results in February, we are actively considering a number of options for NZME and will update shareholders at our AGM in May," she said.

In February, the company canned an IPO for NZME, saying "the advertising market environment is not currently conducive to an IPO and APN will not pursue this approach at this time".

NZME, which publishes the New Zealand Herald newspaper and operates The Radio Network, posted a 3 per cent decline in revenue in calendar 2015. Advertising from its publishing division fell 4 per cent while circulation revenue declined 5 per cent.

Matthew Goodson, managing director at Salt Funds Management, said existing shareholders might not want a stake in NZME.

"A lot of existing holders, who presumably are based in Australia, I don't think would have very much interest in holding onto a very small cap name which is predominantly New Zealand in nature," Mr Goodson said.

Others said APN's debt could make a demerger more complex.

"APN has so much debt on the balance sheet that they can't afford to de-merge and give it out to shareholders like a dividend - they effectively have to get shareholders to pay for it," said an industry adviser who declined to be named.

"It's a source of income for the main APN group, and if they lose it by demerging they have to find a way to pay down debt. That's what had driven them last time to effectively say they would IPO it, so a demerger without some kind of meaningful capital raising and very meaningful reallocation of APN's corporate debt to NZME is going to be hard."

The resignation of NZME's chief executive Jane Hastings also made a demerger appear less likely, that person said.

"She was willing to be a public company CEO, the fact that she moved on indicates it's probably not going to happen - the new CEO is happy to be a long-term employee of a New Zealand subsidiary of an Australian media company," the source said.

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