Eye sale cashes up Ten for bid on NRL rights
by: Darren Davidson
From: The Australian
July 21, 2012 12:00AM
TEN Network has sold outdoor advertising business Eye to oOh!media in a deal worth possibly $145 million, putting the free-to-air network on a firmer financial footing as it bids for NRL broadcast rights.
The media company will receive $120m in cash from the outdoor advertising company's owner, Champ Private Equity, and a deferred consideration of $25m payable three years after completion.
The deal includes all of Eye's Australian and New Zealand businesses, as well as the US, British and Indonesian operations.
However, oOh!Media and Ten intend to on-sell the US and British operations to third parties.
Ten may be required to reacquire them from oOh!Media for a "nominal consideration" if the buyers fail to offload them in an agreed time, but both companies said there had been plenty of interest in the US and British assets.
"Based on our exploration of potential buyers, there has been good interest. We are confident we will find buyers for the US and British businesses," Champ Private Equity director Darren Smorgon said.
The deal had been done at a "fair price", and the company was not interested in retaining the US and British operations because it had a mandate to invest in Australia, he said.
"We want to back oOh!Media to grow in the Australasian market. We don't have a presence in the UK at all," Mr Smorgon said.
The deal depends on approval by the competition watchdog, but analysts do not expect the Australian Competition & Consumer Commission to block the sale, expected to be completed in eight to 12 weeks.
Mr Smorgon said there would be cost savings from merging the two outdoor advertising businesses, and did not rule out retrenchments.
"There are a number of opportunities to save costs, but there is a lot of work ahead to identify the most appropriate cost savings.
"We've formed an integration team to make those decisions."
Citi equities analyst Justin Diddams said the deferred cash payment structure of the deal was "frustrating", but ultimately represented a positive result for Ten.
"It's not a clean break, but it's a good deal for Ten, getting $120m of cash in the door in 2012-13, followed by the $25m in three years," Mr Diddams said.
The price was good, he said, as there were no other bidders after two interested parties dropped out in the early running.
APN Outdoor, a joint venture between Quadrant Private Equity and APN News & Media, and French company JC Decaux both ran the rule over Eye at one stage.
"Management have secured a fair price, given the onerous contracts and lack of bidders for the asset," Mr Diddams said.
"It's a smart move by management, with positive strategic and earnings implications."
Ten chief executive James Warburton said proceeds from the sale would be used to pay down debt and strengthen the balance sheet after last month's $200m capital raising, as a $US125m ($120m) debt facility matured in March.
"It will make our balance sheet stronger by further reducing debt and will give us additional opportunity to invest in the creative renewal of Ten's television content," Mr Warburton said.
Ten's group chief financial officer Paul Anderson said it had not decided how much of the proceeds would be invested in programming, but acknowledged the deal could boost its interest in the NRL sports rights.
"It gives us a lot more flexibility on the balance sheet to do a whole range of things," he said.
Mr Smorgon did not rule out further acquisitions in outdoor advertising, and said no decision had been taken on whether the Eye and oOh!media names would be retained.
"I think it's fair to say we won't be making acquisition relative to the size of oOh!Media or Eye, but we are opportunistic and will look at making other acquisitions . . . We're not looking to expand outside of the out-of-home space."
) Australian FTA television market they might think that in terms of ratings and revenue there is a long way to go down, and if they cant get out of this debt trap now then there is definitely no way out later. Maybe they aught to just take the loss and GTFO while they are only 800m in the red. 
