Monday 07 December 2015 by FIIG Research Company updates

Company updates – Coffey and PMP

This week’s news: We provide an update on Coffey regarding the extension of a takeover agreement and positive news for PMP as Bauer Media exits the Australian magazine distribution network

Coffey

Last Thursday, Coffey International in agreement with Tetra Tech extended the takeover offer period from the 11th to the 23rd of December. 

As at 4 December, Tetra Tech had received offers of Coffey shares equating to about 49.5% of the total company.  We note that such offers are still conditional and subject to the terms of the takeover documents.

It is also worth noting that it is not unusual for larger intuitional investors to hold off until the end of the offer period in the hope that the bid is increased.

On  Monday 7 December, Coffey announced a trading halt to ‘enable the company to respond to an ASX request for information in connection with resolutions passed at the company’s 2015 AGM’.  This appears unrelated to the takeover as the AGM resolutions concern standard items such as the re-election of directors, remuneration and long term incentives.

For full information on the takeover offer please refer to prior articles Coffey Board recommends $0.425 cash per share takeover offer by Tetra Tech and Coffey - Bidder/Target statement released.

PMP

PMP’s magazine print and distribution arm Gordon & Gotch (G&G) is set to benefit with the news that German media giant Bauer Media is planning to wind up its Australian mag distribution business in early 2016 – with G&G left to pick up the job.

Gordon & Gotch as well as Bauer have suffered in recent years with circulation declines and diminishing opportunities for cost reduction.  Industry consolidation was the obvious outcome with PMP management previously highlighting the possibility of taking over Bauer’s distribution business.

For perspective, G&G generated $268m in revenue in FY15 compared to around $390m by Bauer.  However profitability is slim with G&G posting only $3m in EBIT from the $268m in sales.  Further details of Bauer’s financial position are unknown as they are not made public.  We can assume it’s loss making or only marginally profitable given the decision to exit the business.

While increasing PMP’s business it is also, more importantly, likely to stabilise the division (which has been experiencing ongoing decline) with benefits from economies of scale.  G&G is however only a small part of PMP’s overall business contributing ~6% of EBITDA (FY15).

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