Catalyst to take over television studios (extract from Private Equity Media article Dec'06)

Catalyst Investment Managers is to acquire ASX-listed Global Televison Ltd through an off-market takeover at $1.04 a share which values the company at $46 million.

Publishing and Broadcasting (PBL) and the Ten Group Pty Limited (Ten), which jointly hold the majority of the company’s shares, announced on November 13 that they intended to accept Catalyst’s offer in the absence of a superior bid. PBL holds 25.7 per cent and Ten 25.4 per cent of the fully diluted share capital in the company.

The deal will involve immediate debt of $40 million with anticipated aggregate debt of $70 million to be used for future capital expenditure arrangements.

Catalyst has committed to provide support for the company in its estimated $35 million of capital expenditure required to meet demand for production in high definition television and the development of other new technologies over the next three to four years.

Global operates 10 television studios and is Australia’s leading provider of television studio facilities and digital outside broadcast services. In addition to its studios, Global operates six digital production outside broadcast vans and one high definition portable outside broadcast unit.

Global Television’s major clients include commercial television stations Nine, Ten and Seven plus television production companies. The company has more than 160 staff in Sydney, Melbourne and Brisbane and employs many more freelance staff.

Catalyst managing director Trent Peterson said the success of the deal would depend on growth in demand for high definition television services along with increasing outsourcing by television companies.

Mr Peterson said significant expenditure would be required to gear up for high definition television but Catalyst believed the take up of the new technology by television broadcasters would be very rapid, particularly for televising major sports. This would quickly soak up Global Television’s production capacity on weekends. The challenge would then be to make the assets work harder through the week. He believed this would be assisted by television broadcasters increasing outsourcing to production companies as they sought to improve profitability by reducing the capital tied up in production equipment and facilities.

Mr Peterson said that, apart from the need for expenditure on new technology, Global Television’s business model was much the same as any equipment hire business and would involve getting as much use as possible out of the equipment.

He said Catalyst has committed to support the current management under Chris McMillan.

Catalyst also intends to reach an agreement with key management regarding co-investment in the transaction after the close of the share offer.

The offer represents a 30 per cent premium to the closing price of Global Television shares of 80 cents on September 27, the day identified in an ASX price query on October 5 regarding a share price increase.

Quay Capital advised the management led consortium.