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.
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.