A consortium including Tony O'Reilly's Independent News and Media will resume due diligence with target APN News and Media later this week amid pressure to up its A$2.8 billion (US$2.2 billion) offer for the Australasian media group, sources familiar with the situation said.
The consortium, which includes buyout heavyweights Carlyle Group and Providence Equity Partners, met key APN shareholders this week and has so far refused to raise its A$6.05 per share bid, the sources said Wednesday.
APN's independent directors have not yet responded to last week's offer but due diligence would resume this week ahead of a formal proposal. "Due diligence will be in full swing by the end of the week," one source told Reuters.
Shares in APN, which owns New Zealand's largest paper and a string of radio stations, were trading 0.5% weaker at A$6.07 Wednesday. Analysts have said O'Reilly and his private equity partners may have to bid as high as A$6.50.
Independent already owns about 40% of APN.
John Sevior, head of Australian equities at Perpetual which owns 14.8% of APN, said the offer was at the "low end" compared to media deals late last year but declined to comment further. Fund manager Maple-Brown Abbott, which owns 7.1%, declined to comment.
APN and the O'Reilly consortium have failed to agree over the way the consortium has valued APN. Due diligence is not expected to take long as the consortium will work off APN's actual 2006 earnings rather than projected 2006 earnings which they did during previous talks last year. The consortium wants access to APN's 2006 earnings, the 2007 budget and
near-term strategic goals.
Independent made a joint approach with Providence last year but the talks ended without a deal. Carlyle joined the consortium shortly after. Dublin-based Independent publishes 175 newspaper and magazine titles across the globe including Britain's Independent. Its chairman O'Reilly is a former international rugby player and Ireland's best-known businessman.
The buyout firms are the latest private equity groups to grab a piece of the Australian media industry following the passage of a law which allows owners of one form of media to own a second type in the same market and scrapping foreign ownership limits.