--Seven West Media to raise A$440M at A$1.32/share
--Offer at an 18.5% discount to last traded price
--Expects FY12 operating profit of A$473M
(Adds background in 2nd and 3rd paragraph; KKR and Seven Group
participation in 6th paragraph; debt levels in final
paragraph.)
By Ross Kelly and Gillian Tan
SYDNEY--Seven West Media Ltd. (SWM.AU) said Monday it will offer
new shares at a discount to raise around 440 million Australian
dollars (US$450 million), joining a barrage of companies turning to
equity investors to bolster their balance sheets amid heightened
volatility in global markets.
The owner of the Seven free-to-air television network and West
Australian newspaper is issuing new shares at A$1.32 apiece, an
18.5% discount to the closing price Friday of A$1.62. The shares
were worth about A$3.77 in late April immediately before an
earnings downgrade from the company, pinned on weak advertising
markets, triggered a steep decline in their value.
Concerns its earnings weren't high enough to support its debt
pile sparked speculation an equity raising would be needed to make
sure the company didn't risk breaching conditions with its lenders.
Expectations of a raising to pay down debt were putting further
pressure on the company's shares, so some investors expressed
relief after Monday's announcement.
"The stock is too cheap because a key concern is the company's
capital position," said Paul Xiradis, managing director of fund
manager Ausbil Dexia, which owns 5.2% of Seven West Media.
"If that risk is eliminated, the stock will start performing
well," said Mr. Xiradis, who is participating in the raising.
Majority shareholders KKR & Co. and the Kerry Stokes-backed
Seven Group Holdings Ltd. (SVW.AU), which own a combined stake of
around 45%, also committed to take up their entitlements in
full.
Other Australian companies that have recently completed share
issues include free-to-air television rival Ten Network Holdings
Ltd. (TEN.AU), casino owner Echo Entertainment Group Ltd. (EGP.AU)
and wooden pallet provider Brambles Ltd. (BXB.AU).
Fragile consumer confidence fanned by global market instability
is reducing advertising revenue at free-to-air broadcasters.
Newspapers are also facing the structural challenge of readers
migrating online, where advertising margins are thinner.
Four weeks into the top job, Seven West Media's new chief
executive and former oil man Don Voelte said the group would
continue to focus on cost control, but didn't mention any
layoffs.
Executives from the company stressed that the raising hadn't
been inspired by any sharp downturn in advertising markets, which
they said remained on a consistent downtrend.
"It's not like advertising dropped off the end of a truck here,"
Mr. Voelte said on a conference call, while warning the market is
expected to remain weak in the short term.
The company sells its papers in the mineral-rich state of
Western Australia, where unemployment is significantly lower than
other parts of the country. And although free-to-air television is
grappling with weaker advertising, its predicament isn't as dire as
it is for newspaper publishers such as Fairfax Media Ltd. (FXJ.AU),
analysts at Macquarie Group said.
"Free-to-air television has broadly held its share of
advertising spend at around 30% over the last 10 years, in contrast
with the significant drops seen in print media," the Macquarie
analysts said, while keeping an "outperform" recommendation on the
company's shares.
Perth-based Seven West Media said it expected underlying
earnings before interest and tax of A$473 million in the fiscal
year ended June 30, 2012, slightly higher than its most recent
guidance of A$460 million-A$470 million. The raising will cut net
debt to A$1.44 billion from A$1.88 billion.
Write to Ross Kelly at ross.kelly@wsj.com