| Thu 13 Jan 2005, 15:45 | | ANNOUNCEMENT TO PRIMEDIA SHAREHOLDERS |
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PRIMEDIA - ANNOUNCEMENT TO PRIMEDIA SHAREHOLDERS
Primedia Limited
(Incorporated in the Republic of South Africa)
(Registration number 1993/003355/06)
Share code: PMA ISIN: ZAE000035119
Share code: PMN ISIN: ZAE000035127
(`Primedia`)
ANNOUNCEMENT TO PRIMEDIA SHAREHOLDERS
1. INTRODUCTION
A key feature of Primedia`s growth strategy is to enter into new growing sectors
of the media industry in South Africa that Primedia has historically not
invested in. This initiative was previously referred to as New Frontiers but has
been renamed Primedia Unlimited.
In line with Primedia`s advertising and entertainment strategic positioning,
Primedia Unlimited (Pty) Limited (`Primedia Unlimited`) has two divisions -
Primedia Unlimited Advertising (Pty) Limited (`PUA`) and Primedia Unlimited
Entertainment (Pty) Limited (`PUE`).
Primedia has commenced upon the execution of this growth strategy through the
acquisition or conclusion of joint ventures by PUA in respect of four
advertising based businesses (`the acquisitions`) which have strong growth
prospects. PUE has to date not made any acquisitions.
Primedia owns 100% of Primedia Unlimited which in turn owns 88,8%of PUA, with
Ken Varejes, the CEO of PUA and a long term senior member of Primedia`s
management team, owning the balance.
2. DETAILS OF THE ACQUISITIONS
2.1 Wide Open Platform (Pty) Ltd (`Wide Open`)
With effect from 1 July 2004, PUA has acquired a 60% interest in the
business of Wide Open principally from the founding financial partners.
Management owns the balance. Wide Open secures rights to land mark
construction sites and buildings, and airport environments providing
impactful advertising opportunities.
2.2 A+D Media (Pty) Ltd (`A+D Media`)
With effect from 1 July 2004, PUA has acquired 50,1% of the shares and
claims of A+D Media. The shares were acquired from management and Ken
Varejes. Management retains the balance of the shares. A+D Media provide
advertisers with exclusive advertising opportunities at shopping malls and
parking arcades throughout South Africa.
2.3 Forecourt Televison Network (Pty) Ltd (`FTN`)
With effect from 1 October 2004, Comutanet, a subsidiary of Primedia and
which owns Rank TV, acquired 100% of the shares of Forecourt Television
Network (FTN). FTN is South Africa`s only provider of audio visual media to
service stations throughout South Africa. The acquisition was made having
regard to common operating platforms that the highly successful Rank TV and
that of FTN share, as well as the revenue potential from this under-
developed medium. Rationalisation of costs between FTN and Rank TV has
already commenced. Management of FTN has however been outsourced to PUA due
to FTN`s differentiated customer base.
2.4 Primestars (Pty) Ltd (`Primestars`)
With effect from 1 September 2004, a new business initiative, Primestars,
was established between PUA and Martin Sweet, founder of Marketing for
Stars who has established many innovative marketing solutions for
advertisers. PUA has a 50,1% ownership with Martin Sweet owning the
balance.
3. NATURE OF BUSINESSES
3.1 Wide Open
Wide Open is an outdoor media company specialising in large format,
aesthetically pleasing and high impact advertising structures. Wide Open
offers major brands, the opportunity to take complete ownership of unique
urban spaces. The business is also novel in that it operates in the
traditional outdoor advertising arena yet utilises existing structures
(buildings, construction sites, airports and airport buses) to place
advertising. This is contrary to standard outdoor advertising where
structures are built to accommodate advertisers. The benefit of no or
limited capital expenditure results in improved operating margins.
3.2 A+D Media
A+D Media`s focus is advertising concepts in shopping malls and parkade
environments. This ranges from large internally illuminated billboards in
shopping parkades to interior shopping mall advertising such as drop
banners on interior lifts, large static signage and directory board
advertising. Exterior shopping mall advertising also allows for
strategically positioned LED screens and static illuminated billboards. A+D
Media are further able to capture the consumer from entry via parking
ticket advertising until exit at a time closest to that of purchase. This
would include mall promotions to ensure all 6 senses of the consumer are
captured to allow for an enhanced experience for marketers brands.
3.3 FTN
FTN is presently focused on advertising opportunities through large LED
screens with audio compatibility in the forecourts of service stations,
where petroleum companies have taken advantage of the enormous growth in
convenience marketing. The technology for downloading the audio visual
content is satellite-based thereby enabling instant downloading to
accommodate advertisers immediate needs as well as to keep the content
refreshed and engaging whilst consumers fill up for petrol. The content
consists of a 15 - 20 minute loop comprised of entertainment, sports,
advertising and general information. All screens are strategically placed
for maximum visibility and impact.
3.4 Primestars
Primestars was created to generate innovative marketing concepts and ideas
for marketers and consumers using mainly Primedia`s media platforms to
secure execution. Many of the ideas involve leveraging Ster-Kinekor
Theatres whose unutilised capacity will be used to project, through Ster-
Kinekor`s satellite distribution network, internationally acclaimed
speakers like recently Richard Branson, to address a national audience.
Primedia`s media will be used to provide strong cross-promotional support.
Revenue from Primestars will be generated from sponsorships and ticket
sales.
4. PURCHASE CONSIDERATION
The cost of the acquisitions amounted to R19 million and have been settled in
cash. The Wide Open and A+D Media acquisitions are subject to the achievement of
profit warranties and should these be achieved a further cash consideration of
approximately R11 million will be settled.
5. RATIONALE FOR THE ACQUISITIONS
PUA`s investment strategy is to acquire stakes in businesses that:
- Are entrepreneurially run;
- Are profitable and have some track record;
- Have carved out growing niches in an ever fragmenting media market
place;
- Are scalable; and
- Are complementary to the rest of the Primedia group, thereby bringing
about further synergy within the group.
The specific rationale for each of the acquisitions is as follows:
Wide Open
Wide Open`s creative expertise is unique and highly effective with advertisers.
It is the intention to extend its innovative offerings as well as its reach into
more cities of South Africa, as well as into Africa. It is also anticipated that
Wide Open will be able to benefit from Primedia`s broad customer base, many of
whom have not been exposed to Wide Open`s media offerings.
A+D Media
Shopping centres and parking garages at shopping malls are a major convergent
point for consumers. In the international markets of late, mall and parking
garage media have become one of the fastest growing sectors of the media
industry as advertisers vie for consumers` attention. In South Africa, this
medium is in its infancy and it is the intention for A+D Media to increase its
footprint to provide advertisers with national and regional coverage. In order
to further distinguish this company as a service provider to mall owners, A+D
Media intends to leverage Primedia`s existing powerful network of media to drive
footfall to the shopping centres.
FTN
Service stations are another major convergent point for consumers. Using the
existing 40 TV screen network as a base, it is the intention to establish a
broader offering of media services from a significantly larger footprint of
service stations, thus giving advertisers massive reach and alternative ways of
communicating with the consumer. In line with this broader focus, FTN will be
changing its name to Forecourt Media.
Primestars
The rationale for the development of Primestars was to allow Primedia to enter
into the arena of cause-related marketing. Many of its initiatives will involve
working with Ster-Kinekor Theatres to leverage its unutilised capacity. The
utilisation of Ster-Kinekor Theatres will allow for additional revenue streams,
and marketing opportunities too further stimulate movie going at Ster-Kinekor
Theatres.
6. CONDITIONS PRECEDENT
All conditions precedent have been fulfilled.
7. FINANCIAL EFFECTS OF THE ACQUISITIONS
The acquisitions will not have a material financial impact on Primedia in the
short term. The acquisitions are however anticipated to contribute meaningfully
in the medium term as greater scale is achieved.
Sandton
13 January 2005
Investment bank Sponsor Corporate law advisers
Investec Bank Limited Investec Bank Limited Edward Nathan (Pty)
Limited
