What does the acquisition of the print business of Mid-Day Multimedia Ltd (MML) by Jagran Prakashan Ltd (JPL) mean for shareholders? The MML scrip has moved up sharply after the announcement, while the JPL stock fell a tad.
Besides acquiring readers in three languages—Gujarati, Urdu and English—the JPL management, in a conference call with analysts, highlighted a few other synergies. JPL owns bilingual daily Inext and neighbourhood tabloid CityPlus, which have content synergies with MML. Through its pan-India network, it hopes to strengthen Mid-Day’s brand presence and recover ground that was lost due to resource contraints, mainly because MML’s radio business turned out to be a cash guzzler.
MML can benefit from JPL’s corporate advertisers’ pool. Mid-Day had revenues of around Rs95 crore and a profit before tax of around Rs15 crore during fiscal 2010. Synergies in marketing could bring in 10-15% expansion in revenue in the medium term. Common marketing and administrative facilities, printing facilities and procurement of newsprint are areas where costs could be cut. And the land and printing press of MML together are estimated to be worth around Rs50 crore.
MML’s operating profit margin is expected to double to around 30% in the next two-three years. This will benefit JPL as MML becomes its 100% subsidiary.
Graphic: Yogesh Kumar / Mint
Analysts value the deal at around Rs175 crore. The promoter holding in JPL will drop from 55.3% to 52.7%. Shareholders of MML will get seven shares of JPL for every two shares they hold—giving them access to the business of the largest print daily too. Besides, as MML will continue to be listed on the exchanges, shareholders will continue to be invested in the radio business. Small wonder then that shares of MML have risen from Rs28.5 to Rs33.5 on the National Stock Exchange.
JPL closed lower, from Rs118.6 to Rs115, as analysts think the acquisition, which will take six-eight months, is earnings neutral for fiscal 2011. Analysts estimates that the acquisition comes at around 19 times the profit earned, a small premium, as JPL trades around 18 times its future earnings.
Hindustan Media Ventures Ltd, a subsidiary of Mint publisher HT Media Ltd, publishes Hindustan, a Hindi daily which competes with JPL flagship Dainik Jagran.
The Blackstone Group LP had invested Rs225 crore in JPL’s holding firm a month ago, which may be used for a regional acquisition. JPL will see the advantages of scalability and quick revenue expansion that come with inorganic growth in the long term.
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