Johnston Press makes cash call

May 14 2008

Newspaper group hopes to raise £212 million

Scotsman publisher Johnston Press hasannounced plans to raise  £212m through a rights issue and subscription of new shares.

The company has made the move to avoid breaching its financial covenants after revealing a 7.1 per cent plunge in advertising revenues in the 17 weeks to April 26.

The Edinburgh based group which also publishes Scotland on Sunday and the Edinburgh Evening News also revealed that Malaysian investment group Usaha Tegas is acquiring a 20 per cent stake in it after buying shares from a number of Johnston family shareholders.

The move will reduce the Johnston family shareholding in the group to ten per cent.

It will also inevitably spark speculation that Usaha Tegas may want to launch a full takeover bid for Johnston in the future.
Johnston Press said that given the reduction in consumer confidence and deteriorating economic forecasts the board believed that the prudent action was to raise equity capital in order to reduce its debt which stood at £700m at the end of April.

Chief executive Tim Bowdler said Usaha Tegas’s strategic 20 per cent shareholding would reinforce Johnston Press’s efforts to develop new media opportunities on the foundation of its regional coverage and its traditional culture.

“The directors believe that Usaha Tegas' knowledge and expertise in the media sector as a whole and its track record of investing in companies will provide the company with valuable insight and guidance through the current macroeconomic climate and assist the Company in executing its business plan,” said the company.

The issue price for the new shares will be 53p which is a 61 per cent discount of the price of Johnston Press shares on May 13.

Usaha Tegas is headed by south east Asia’s second richest businessman Ananda Krishnan whose fortune is said to be worth over $4bn. His business interests around the world include oil and gas, stud farms, film studios, power generation and property development. He began building his media empire in the early 1990s.

A graduate of Harvard Business School, Ananda is also known for his philanthropy.

Ralph Marshall of Usaha Tegas said it believed in the potential of Johnston Press.
“Usaha Tegas with its links globally in telecommunication and media will be a supportive shareholder, and will make contributions on a continuing basis where appropriate, in collaboration with internal management skills," he said.