Credfit: Elisha Terada via Unsplash
Nine Entertainment, with television revenue mostly behaving and with digital subscriptions on the rise, also has a happy payday ahead -- the cash from the sale of online real estate classified site Domain.
The media group’s share, from its 60% holding, is expected to be A$1.4 billion in cash proceeds, net of capital gains tax.
This will put Nine in a net cash position.
The company intends to distribute a portion of that to shareholders via a fully franked special dividend of between 47 and 49 cents a share.
The deal with US-based property group CoStar for A$4.43 a share is expected to be completed in the September quarter.
Nine Entertainment's share price jumped, as did Domain’s, in the wake of the takeover bid.
Domain reported in February a 7.4% lift in revenue to $217.2 million for the half year to December, and net profit was up 28% to $33.1 million.
Nine posted a slide in profit in a challenging advertising market with revenue up just 1% in the six months to December. Revenue was $1.39 billion for the half year, while net profit after tax fell 25% to $112.2 million.
However, the company this month reported total TV advertising revenue increased by almost 8% in the March quarter. The outlook for the rest of the year is clouded by the current economic and market uncertainty.
Nine argues that, despite losing the classifieds in return for a pile of cash, it will continue to be Australia’s “largest locally owned media” company with a unique portfolio of assets across streaming and broadcast television, radio, publishing, digital and data.
And the company has raised the possibility of using some of the funds for “investment opportunities” both internally and externally.
Analysts see the market valuing Nine, ex-Domain, at $1.05 a share.
“What does Nine's balance sheet look like post Domain?” analysts at Jarden write in a note to clients.
“We estimate that post the payment of a dividend, Nine would be in a significantly net cash position.”
This could be in the range of $120 million to $170 million.
With significant ability and opportunity to raise more funds, Nine could be in the position to make a significant acquisition.
Nine's view of the Domain deal via a presentation to the Macquarie conference earlier this month:
Have something to say on this? Share your views in the comments section below. Or if you have a news story or tip-off, drop us a line at adnews@yaffa.com.au
Sign up to the AdNews newsletter, like us on Facebook or follow us on Twitter for breaking stories and campaigns throughout the day.