Wilson Asset Management chairman Geoff Wilson has rejected PwC’s independent expert report, which backs Nine’s takeover of Macquarie Media, and is pressuring the radio broadcaster’s board to get a better deal for minority shareholders.
Mr Wilson wrote to the Macquarie board’s independent directors on Sunday. He outlined reasons he believes Nine’s $1.46 per share offer for the remaining 45.6 per cent of the radio broadcaster isn’t good enough.
He said the offer is opportunistic following a bad earnings result which was hit by a NSW state election and a federal election.
He said WAM’s analysis found there are more savings and potential revenue gains than what the offer represents to shareholders. He also said Macquarie shareholders will miss out on $14.4 million in franking credits under the current deal structure.
WAM has increased its holding in Macquarie to around 4.7 per cent, or 8.1 million shares, since the offer was made.
“The Corporations Act 2001 provides far-reaching remedies for oppressed minority shareholders. Directors have the obligation to exercise their powers and manage the company in the interests of all shareholders,” Mr Wilson wrote in a letter to Macquarie’s independent board committee, chairman Russell Tate and directors Louise McCann and Monique Anderson.
Mr Tate was overseas on Sunday and unable to be reached. Nine, which owns The Australian Financial Review, declined to comment.
Ms Anderson is chief executive of John Singleton Group. Mr Singleton holds a 32.3 per cent stake in Macquarie.
“While minority shareholders often have little or no ability to influence the affairs of a company, Directors must nonetheless act fairly between shareholders and ensure their decisions promote the interests of the company and shareholders generally, not just the majority,” Mr Wilson wrote.
He asked for a response from the independent board committee by 5pm Friday September 27.
Mr Wilson faces an uphill battle in his push for a bigger offer from Nine. Mr Singleton and Mark Carnegie are expected to back Nine’s offer after a PwC independent expert’s report declared the offer fair and reasonable.
PwC valued Macquarie at between $1.44 and $1.66 per share. Macquarie shares have been trading around the $1.46 offer price since the deal became public. They had traded at $1.745 on the trading day prior to the announcement of the acquisition.
Combined with Nine’s 54.4 per cent stake, the three holdings would go over the 90 per cent threshold Nine needs to compulsorily sweep up the rest of the shares.
Mr Wilson, whose fund owns more than 8.1 million Macquarie shares, has been the most vocal critic of the offer along with Centennial Asset Management principal Matthew Kidman and former media executive Tim Hughes.
“It is our view that the Independent Directors’ comments in the Target Statement are flawed, unbalanced and illogical. In the 12 months before the Offer, the Macquarie Media Limited’s share price traded between $1.55 and $2.18 per share,” he said.
Mr Wilson said there are more synergies than the more than $10 million outlined in the offer. The letter said that the merger of Macquarie and Fairfax Radio produced more synergies between 2014 and 2019 than were originally announced prior to the deal. At the time, Macquarie noted those synergies would be achieved by June 30, 2016.
Mr Wilson also said there are significant revenue synergies which minority Macquarie shareholders won’t see the benefit of.
“According to Deloitte, the Commercial Radio Market in Australia is worth approximately $800 million. Agency radio revenues account for half of the market, and Nine aims to lift MRN’s market share by 11 per cent, representing an additional $44 million in revenue,” he said.
“Our analysis of MRN suggests that 50 per cent of the cost base is fixed. This simple lift in market share would therefore increase EBITDA by $22 million.”
Mr Wilson said assuming $32 million in cost and revenue synergies and “conservatively” removing the control premium, using PwC’s multiples, would imply a value of $2.44 to $2.79 per share.
The offer value is greater than 10 times Macquarie’s underlying earnings before interest, tax, depreciation and amortisation for 2018-19 of $27.1 million.
Mr Tate has previously told the Financial Review the multiples are attractive and there are reasons why the offer price was below where the share price was prior to it being made public.
These include a lack of liquidity, with three shareholders holding more than 90 per cent – meaning the share price did not reflect Macquarie’s value – and that there is is no indication of a rival bidder for minority shareholders, which could see shares drop further if the offer isn’t supported.