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Naspers Limited - Naspers acquires equity stake in Abril
NASPERS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1925/001431/06)
Share code: NPN & ISIN: ZAE000015889
("Naspers")
NASPERS ACQUIRES EQUITY STAKE IN ABRIL
Naspers has acquired, through its offshore subsidiary MIH B.V., a 30% stake in
leading Brazilian media company Abril S.A. ("Abril"), for a cash consideration
of US$422 million ("the transaction"). The transaction provides Naspers with an
opportunity to participate in the growing Brazilian media market through a
leading enterprise.
OVERVIEW OF ABRIL
Abril is the largest magazine publisher in Brazil and one of the largest media
companies in Latin America. It has a 54% share of magazine circulation and 58%
of magazine advertising revenues in Brazil. It publishes five of the top ten
magazine titles in Brazil. Its flagship newsweekly, Veja, is the fourth highest
selling weekly in the world, has a weekly circulation of approximately 1,1
million and an average readership of 8 million, the largest of any magazine
globally not owned by a US-based group. In addition, Abril owns the country"s
leading educational book publisher and a pay-television network. Prior to the
transaction, members of the founding Civita family held 86,2% of Abril"s equity
and Capital International held 13,8%.
RATIONALE
The acquisition is in line with Naspers"s strategy to expand into new markets.
In particular, the group is focused on the BRICSA countries (Brazil, Russia,
India, China, South and sub-Saharan Africa), which present attractive growth
opportunities.
To date, Naspers has had some success in establishing a presence in China. This
transaction will establish a solid presence in Brazil. Further opportunities are
being pursued.
Brazil is an attractive market, where strong economic growth is expected to
drive domestic media growth. The acquisition also provides Naspers with the
opportunity to apply its expertise in emerging markets.
KEY TERMS
Naspers will acquire Capital International"s stake in Abril for US$177 million,
shares held by members of the Civita family for US$86 million and subscribe for
newly issued Abril shares for US$159 million. The proceeds received by Abril
from the transaction will be used to reduce debt and to fund expansion of the
business. After the transaction, the Civita family will hold 70% of Abril and
Naspers 30%.
Naspers and the Civita family have also entered into a shareholders" agreement.
Amongst other terms, this allows Naspers"s representation on Abril"s board to be
proportionate to its percentage interest in the company. The companies will also
co-operate to share media expertise in pay TV, Internet, magazines and book
publishing.
Abril"s current management team, headed by Chairman and CEO Robert Civita, will
continue to lead the company.
There are no unfulfilled conditions. The effective date of the transaction is
9 May 2006.
FINANCIAL EFFECTS
Naspers will equity account its 30% interest in Abril. In the financial year
ended 31 December 2005, Abril generated revenues of BRL2,5 billion (R7,1
billion) and Ebitda of BRL468 million (R1,3 billion).
At 31 December 2005, Abril had net debt of some US$500 million, largely from
funding the development of its various media assets. This debt is being paid
down from cash flows generated from operations. A portion of the proceeds of the
transaction will also be utilised to reduce debt.
As a consequence of the current level of debt, and the related interest cost,
the transaction will, in the short term, have a marginally dilutive effect on
Naspers"s headline earnings. However, over the medium and longer term, the board
is of the view that the transaction will enhance value.
The table below sets out the pro forma financial effects of the transaction on
Naspers, based on the published, reviewed results of Naspers for the six months
ended 30 September 2005. The pro forma financial information is the
responsibility of the directors of Naspers.
Before After
the transaction the transaction Change
Attributable headline
earnings per share 366 348 (5%)
Attributable earnings per
share 376 363 (4%)
Notes:
The pro forma attributable earnings and headline earnings per share are based
on:
' the audited accounts of Abril for the year ended 31 December 2005, prepared
in accordance with Brazilian generally accepted accounting practice and
averaged for a six-month period
' an assumed effective date for the transaction of 1 April 2005
' an assumption that Naspers incurred an after tax cost of 5% on funds
utilised to fund the transaction
' an assumption that Abril utilised the proceeds received of US$159 million
to reduce debt
' the weighted average number of shares at 30 September 2005 used to
calculate the attributable earnings and headline earnings per share was
283 154 000.
The pro forma financial effects are for illustrative purposes only and may not
give a fair reflection of Naspers"s financial position, changes in equity,
results of operations, cash flows or the effects on future earnings after the
transaction. The acquisition constitutes approximately 7% of Naspers"s current
market capitalisation.
There is no material effect on Naspers"s net asset value and net tangible asset
value per share. Naspers will fund the transaction from existing cash resources.
Cape Town
8 May 2006
Sponsor
Investec Bank Limited
(Registration number 1969/004763/06)
Financial adviser for the transaction
CITIGROUP
Corporate and Investment Banking
Date: 08/05/2006 07:20:23 AM Supplied by www.sharenet.co.za
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