When media buying colossus Harold Mitchell announced in December the sale of his family’s old media buying business, Mitchell & Partners, to its listed internet offshoot, emitch, the details of the deal were vague.
The information memorandum has now arrived and with emitch shares taking off in recent days after a strong half year profit, it’s clear that Mitchell is a wealthy man, deserving a place back on the BRW Rich List.
The KPMG report talks about a valuation of $97.6 million on Mitchell & Partners, but the recent rally in the emitch share price means we’re now talking wealth well north of that figure.
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The deal is primarily cash funded with the Mitchell family and their associates scoring $63 million up front – their biggest rock solid payday ever – and a further $12.5 million deferred payment in March 2008. Mitchell & Partners will also repay a $25 million loan to the Mitchell family. This money will effectively come from ANZ which has agreed to a $40 million debt facility with emitch which will initially be drawn to $26 million.
As part of the deal, the Mitchell family is being issued with 14.7 million new emitch shares at the nominal price of $1.10 a piece. At last night’s close of $1.45, these are worth $21.3 million.
Harold has agreed to pump $17.2 million of the cash back into emitch when the family takes up its entitlement under the 2-for-9 rights at $1.05 a share to raise $40 million. The result of all this will lift the family’s emitch stake from 80 million to 112 million shares, worth $162.4 million based on last night’s close. In percentage terms, the Mitchell family – Harold, wife Beverley and their two children, Stuart Mitchell and Amanda Feenstra – will lift their stake in emitch from 43% to 45.9%.
When you add back the net $83.3 million in cash they’ll receive, the total play is worth $245.7 million, easily enough to have Harold back on the BRW Rich List which dumped him in 2001.
Sure, there is a stockmarket bubble but the new expanded listed entity is far more solid than the old emitch and that’s after Harold has taken $83.3 million in cash off the table – without any strings attached and without much tax owing.