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

Reuters

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

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

* 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 CoPty Ltd , saved from going into receivership by twoU.S. private equity funds a year ago, raised A$631 million($576.45 million) in the country's second-largest initial publicoffering this year.

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

Many in the market are still scarred by the 2009 listing ofdepartment store company Myer Holdings Ltd by privateequity firms TPG Capital and Blum Capital. Myer is yetto trade above its A$4.10 issue price.

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

Sydney-based private equity firm Crescent Capital Partnersis seeking to cut its shareholding in insurer Cover-More Groupthrough an IPO.

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

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

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

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

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

The IPO prices Nine at a multiple of 8.3 times earningsbefore interest, tax, depreciation and amortisation, the companysaid in a statement on Wednesday.

By comparison, Seven West Media Ltd, which ownsrival Seven TV Network, is currently trading on a forward priceearnings multiple of 9.74 times, according to Thomson Reutersdata.

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

Revenue rose to A$1.49 billion in the year to June fromA$1.39 billion in the previous year, a pro forma consolidatedincome statement in Nine's IPO prospectus shows. Key in the gainwas an increase in advertising revenue share in Nine'stelevision business Nine Network, the firm's largest division.

But overall earnings before interest and tax declined toA$250.1 million from A$270 million. An increase in expenses atNine Network, including the cost of broadcast rights for the2012 Summer Olympic Games, contributed to the fall in profit.

NINE LIVES

Chief Executive David Gyngell said in a statement that Ninewas "delighted by the strength of demand received for our IPOacross 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 whichwas responsible for Asia's biggest ever private equity lossafter its previous owner CVC Capital Partners put toomuch leverage into the business and market conditions turnedbad.

CVC lost A$1.8 billion and has essentially pulled out ofAustralia, now merely managing their investments rather thandoing 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 thecompany, which was worth just over A$100 million.

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

After Nine's listing, Oaktree's holding in Nine will drop to14 percent from 28 percent and Apollo's to 22 percent from 26percent.

Others looking to the market include Cover-More Group, whichis seeking to raise A$521.2 million in an IPO, with CrescentCapital reducing its shareholding in the company to 13 percentfrom almost 83 percent.

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

Upping the tension, KKR & Co last month called off aplanned A$500 million IPO of mining services firm Bis IndustriesLtd amid negative sentiment for companies exposed to theresources sector.

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