Alma Media Corporation’s Board of Directors offers shareholders an alternative

ALMA MEDIA CORPORATION STOCK EXCHANGE RELEASE 24 JANUARY 2005, AT 8.30  1 (6)

 

ALMA MEDIA CORPORATION’S BOARD OF DIRECTORS OFFERS SHAREHOLDERS AN ALTERNATIVE

 

– Alma Media’s Board of Directors will offer shareholders at the extraordinary general meeting an alternative that is considerably higher in value than the Schibsted ASA offer.

 

– In this alternative Alma Media Corporation will sell its Broadcasting division to a company jointly owned by Bonnier & Bonnier AB and Proventus Industrier AB. The enterprise value of the Broadcasting division will be EUR 460 million.

 

– Bonnier & Bonnier AB and Proventus Industrier AB will sell the Alma Media Corporation shares in their possession to a newly established company, Almanova.

 

– Almanova will make a public offer to all Alma Media’s shareholders excluding the two mentioned above.

 

– In this offer EUR 14.00 will be paid for each Series I share, comprising EUR 6.50 in cash and the remainder in Almanova shares, and EUR 12.00 for each Series II share, comprising EUR 5.60 in cash and the remainder in Almanova shares. EUR 29.00 will be paid in cash for each 1999A warrant and EUR 25.70 in cash for each 1999B warrant.

 

– After this Alma Media Corporation will be merged with Almanova. The new company will continue, under the name of Alma Media Corporation, to engage in newspaper publishing, business information production and distribution, and classified marketplace services.

 

– Shareholders representing about three quarters of all the votes and more than 60% of all the shares have already indicated their support to this proposal.

 

Alma Media’s Board of Directors has convened an Extraordinary General Meeting for 31 January 2005 to take the decision to amend the article in the company’s articles of association stipulating the company’s field of business, and to authorize the Board of Directors to sell the Broadcasting division or otherwise to participate in restructuring of the broadcasting sector. In the Board’s opinion, the proposed alternative is superior to the Schibsted offer.

 

The Board proposes that Alma Media Corporation sell 100% of the MTV Oy shares including its 23.4% holding of the TV4 AB shares and 74% holding of the Oy Suomen Uutisradio Ab (Radio Nova) shares to a company owned by Bonnier & Bonnier AB and Proventus Industrier AB for an enterprise value of EUR 460 million.

 

Simultaneously with the sale of the Broadcasting division Bonnier & Bonnier AB and Proventus Industrier AB will sell their aggregate holding of Series I shares, 13 114 380 in all, for EUR 14 per share and their aggregate holding of Series II shares, 13 006 588 in all, for EUR 12 per share, making a total price of approximately EUR 340 million, to a newly established company Almanova.

 

After this Almanova will make a conditional public offer based on consideration in cash and the exchange of shares to all the Alma Media Corporation shareholders and warrant holders. Holders of Series I shares will be offered a cash payment of EUR 6.50 per share and 1.25 Almanova shares, and holders of Series II shares a cash payment of EUR 5.60 per share and 1.07 Almanova share. EUR 29.00 will be offered for each 1999A warrant and EUR 25.70 for each 1999B

warrant. Bonnier & Bonnier AB and Proventus Industrier AB have informed the Board that they will not participate in the conditional public offer. Following completion of these measures the two above mentioned companies will cease to have any holding in Alma Media. The Broadcasting division’s enterprise value in this transaction will be EUR 460 million and the equity value of the entire Alma Media Corporation an estimated EUR 813 million after purchase of the warrants.

 

After the close of the public offer Almanova will apply for listing on the HEX Helsinki Exchanges, and Almanova Corporation and Alma Media Corporation will finally be merged into Alma Media Corporation. The result will be a public limited company which will engage in all the same businesses as the existing Alma Media Corporation with the exception of Broadcasting. The company will have only one share series. The existing holders of the Series II shares currently

 

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hold 12.5% of the existing Alma Media’s votes; in the new Alma Media their holding will amount to 61.6% of the votes. The new company’s pro forma net sales in 2005 will be an estimated EUR 292 million (EUR 282 million in 2004) and the pro forma operating profit, excluding one-off items, transaction costs, non-recurring items and associated companies, will total EUR 41.5 million (EUR 38.4 million in 2004) according to preliminary information based on IFRS principles.

 

Should all the other shareholders, not including Bonnier & Bonnier AB and Proventus Industrier AB, accept the exchange offer, the new company’s pro forma equity ratio will be approximately 49% and it will have approximately 42 million shares, approximately one third of which will be foreign-held. Series I shareholders receive 1,9% in Almanova for each percentage held in Alma Media and Series II receive 1,6%.

 

Kari Stadigh, deputy chairman of the Board of Directors:

 

– Last spring Alma Media, together with certain external consultants, began to evaluate the possibilities for raising the shareholder value of the company and in the autumn this evaluation centred around the Broadcasting division. The evaluation indicated that a good alternative with respect to the interests of all Alma Media Corporation’s shareholders would be to withdraw from the Broadcasting business in this market situation. At the end of the evaluation process the Board had a number of alternatives on the table; the alternative it has now chosen is the best for all the shareholders.

 

The alternative proposed by the Board of Directors is distinctly better for the shareholders than the public offer made by Schibsted on 3 January. In the conditional offer proposed here, shareholders will receive a significant cash payment. Furthermore, the proportional holdings of those shareholders that accept the conditional offer will increase significantly in new Alma Media, whose businesses will cover the operations of the existing Alpress, Business Information Group and Media Services divisions.

 

The alternative will create a strong media company with diversified ownership and with good prospects for the future. JPMorgan, which has acted as an advisor to the Board of Directors, and the investment bank Mandatum, which has advised Alma Media’s Executive Committee, have evaluated the available alternatives and in their opinion the model presented here supports the interests of the shareholders.

 

President and CEO Juho Lipsanen:

 

The new proposal of the Board of Directors is based on the assessment that it can be put into effect and that it treats all the shareholders equally. If implemented, the new Alma Media will be a listed company able to improve its already good profitability and increase its cash flow. The company has strong potential for organic growth in the business media, the afternoon paper market and its classified online services business. I am confident that the chain concept introduced in Alpress will still be able to generate considerable added benefit. I believe that the new Alma Media’s clear ownership structure, good customer relations and competent employees will make it an attractive investment and partner in the future. The proposal also safeguards the position of the personnel in both the new Alma Media and in the Broadcasting division as this moves to new ownership.

 

 

APPENDIX: Boards proposal

 

ALMA MEDIA CORPORATION

Ahti Martikainen

Vice President, Corporate Communications and Investor Relations

 

 

                                                      

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Further information:

                                                                 

Juho Lipsanen, President and CEO, +358 9 507 8715

Ahti Martikainen, VP, Corporate Communications and IR, +358 9 507 8514

Teemu Kangas-Kärki, CFO, +358 9 507 8703

 

Alma Media will hold a conference for media representatives today, commencing at 11.00, at Restaurant Pörssi, Fabianinkatu 14, Helsinki, and a conference for analysts commencing at 12.00 at Restaurant Savoy, Eteläesplanadi 14, 7th floor, Helsinki. Each conference will last about one hour.

 

The 11.00 conference can also be followed live through the Kauppalehti Live service at www.almamedia.fi or www.kauppalehti.fi/live. The material presented at the conference will be available on the company’s website www.almamedia.fi at 11.00.

 

 

Alma Media Corporation            APPENDIX

 

MOTIONS OF THE ALMA MEDIA BOARD OF DIRECTORS TO THE GENERAL MEETING CONCERNING AMENDMENT OF THE OBJECTS PROVISION OF THE ARTICLES OF ASSOCIATION AND AUTHORISATION OF THE BOARD TO SELL THE BROADCASTING DIVISION

 

The Management of Alma Media has since the spring of 2004 been engaged in an internal review process and since the autumn of 2004 studied the future prospects and development alternatives for the group’s Broadcasting division. The Board of Directors started in the beginning of November 2004 a review process concerning alternatives for restructuring of the television business as disclosed in the release dated 22.12.2004. The Broadcasting division consists of MTV3, SubTV, Radio Nova and a participation in the Swedish TV4. As a result of this process the alternatives and plans have become concretised to the extent that the Board is able to put a motion to the general meeting on the action plan and to ask the authorisation of the general meeting to implement the plan.

 

As the result of its consideration of the various alternatives the Board has decided to propose to the general meeting the implementation of structural plan (the “Plan”), in which the company will sell the Broadcasting division to a joint company of Bonnier & Bonnier Ab and Proventus Industrier AB on the basic terms that Bonnier & Bonnier and Proventus simultaneously sell all their Alma Media shares to a new company (“Almanova”) to be established, and into which  Alma Media Corporation will merge during the process with the effect that the Alma Media shares purchased from Bonnier & Bonnier and Proventus as well as possibly other shareholders will be cancelled. Almanova would continue the other businesses than the Broadcasting division to be sold, i.e. the businesses of the Alpress, Business Information Group and Media Services divisions and the Talentum participation. The basic conditions, components, financial parameters and essential considerations are summarised below:

 

The Plan

 

1. Alma Media will conditionally sell the companies and participations of its Broadcasting division to a joint company of Bonnier & Bonnier and Proventus at an enterprise value of 460 MEUR less the net external loans of these companies estimated to be in the range of 83 MEUR. The sale would be consummated, if the competition authorities will not oppose the sale and the present Finnish television and radio concessions continue, and provided that Bonnier & Bonnier and Proventus sell their Alma Media shares to Almanova.

 

2. Almanova will conditionally purchase all 13,114,380 Alma Media I-series shares and all 13,006,588 II-series shares of Bonnier & Bonnier and Proventus at a price of 14 euros per I-series share and 12 euros per II-series share, totalling approx. 340 MEUR. The purchase would be consummated, if the sale of the Broadcasting division will be completed.

 

3. Almanova will make a voluntary tender offer to the Alma Media shareholders (others than Bonnier & Bonnier and Proventus) for their Alma Media shares on the terms that each I-series shareholder receives 125 Almanova shares of 6 euros

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each against 100 Alma Media shares plus a cash consideration of 6.50 euros per tendered share, and each II-series shareholder will receive 107 Almanova shares of 6 euros each for 100 Alma Media shares tendered plus a cash consideration of 5.60 euros per share. Consequently, Almanova would have only one common series of shares. The tender would be conditional and subject to the sale of the Broadcasting division, that the purchase of the Bonnier & Bonnier Alma Media shares can be consummated, and that Alma Media revokes the redemption provision of its Articles of Association (14 §).

 

4. Almanova will as soon as possible seek listing of its shares on the Helsinki Stock Exchange in connection with the closing of its tender offer to the Alma Media shareholders.

 

5. Following the share transfers described above, Alma Media will merge into Almanova, which would issue a merger consideration to the Alma Media shareholders excluding itself of 7 Almanova shares for 3 Alma Media I-series shares and 2 Almanova shares for each Alma Media II-series shares. To the extent the shareholding of an Alma Media I-series shareholder is not divisible by 3, the merger consideration would be paid in cash at 14 euros per share. The option rights issued by Alma Nova would be compensated by cash payments on the basis as the same pricing as the shares.

 

The Plan is based on the assumption that Alma Media will not distribute any dividend for fiscal 2004. In the event that any dividend will be declared, then the amount thereof will be reduced from the cash consideration under 3 above, and in the merger of the companies the merger consideration will be adjusted in accordance with the pricing principles stated in 2 above.

 

Financial effects

 

The Board estimates that the implementation of the Plan will have the following financial effects assuming that all shareholders tender their shares in the public offer. To the extent the exchange of shares will take place as merger consideration without cash, the equity will increase and the interest bearing debt will decrease. Alma Media’s profit for the sale of Broadcasting will be in the range of 320 MEUR.

 

IFRS operational pro forma excluding associated companies, transaction costs and other non recurring items:

 

1) Interest expense in 2005e is based on total debt of MEUR 181 with interest rate of 5% and financial lease of 20 MEUR with lease expense of MEUR 1.2

2) 42.2 million shares

3) Assuming full acceptance of voluntary offer

4) Equity pro forma post voluntary tender offer and merger excluding any 2005 effects.

 

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Considerations

 

When taking stance to the Board’s proposals and choosing between the available options, the shareholders should in the opinion of the Board pay attention to the following issues:

 

1. The Board has received several offers and price indications for parts of the Broadcasting division which summed up exceed the price in the Plan by some 10-15 %. On the other hand the Board has price indications for the other businesses as well which exceed the valuation used in the pricing of the Alma Media shares by some 15-20%. Taking into account the relative values, transaction risks, other factors as well as the feasibility of the various alternatives the Board is of the opinion that the Plan is superior to the other alternatives for the company and its shareholders provided that the terms of sale to be agreed do not cause any price adjustment risk.

 

2. Schibsted ASA has made a public tender offer for Alma Media shares and option rights which closes on 31.1.2005. The offered price for the Alma Media I-series shares is 11.40 euros and 10.70 euros for the II-series shares paid in cash. The offered prices per share correspond to a total share and option rights value of 707 MEUR.

 

Pursuant to the Board’s proposal and the Plan the value of each I-series share is 14.00 euros and 12.00 euros for each II-series share which make up an aggregate value of all shares and option rights of approx. 826 MEUR. Under Schibsted’s tender offer the whole consideration is paid in cash whereas under the Plan the shareholders can, by accepting Almanova’s offer, receive a maximum cash payment of 6.50 and 5.60 euros per share and the remainder of the consideration is paid in the form of Almanova shares. Consequently, when comparing the Plan and the Schibsted offer the shareholders must take stance to the value of the Almanova shares.

 

The Board of Alma Media and its advisors have in their considerations determined that the 6.00 euros per share value of the Almanova shares represents a fair market value and thus it is comparable to a corresponding cash consideration.

 

3. The capital gains arising from the acceptance of Schibsted’s tender offer and Almanova’s tender offer as described in the Plan (including consideration in kind) are taxable capital gains. In a merger the merger consideration does not result in any capital gain, if the consideration is given in the form of shares of the receiving company. The Board has in the time available not been in the position to ascertain that the tender offer of Almanova preceding the merger will not affect the tax treatment of the merger consideration.

 

4. The share capital of Alma Media is distributed among 26,056,004 I-series shares and 37,364,868 II-series shares, totalling 63,420,872 shares. Almanova will under the Plan have only one common series of shares. As the shares 26,120,968 to be sold by Bonnier & Bonnier and Proventus will be cancelled without merger consideration, the proportional shareholding of the series I shareholders will decrease to approx. 38 % from approx. 41 % and that of the series II shareholders increase from approx 59 % to approx. 62 %. The consolidation of the two series of shares into one results for the former series I shareholders in a reduction of their aggregate votes from approx. 87 % to approx. 38 % and an increase of the votes of the former series II shareholders from approx. 13 % to approx. 62 %.

 

The motions of the Board

 

On the basis of the general conditions described above the Board of Directors proposes that the general meeting decides

 

1. to amend clause 2 of the Articles of Association, pursuant to which the field of business of the company is to publish, either directly or through its subsidiaries, daily newspapers and periodicals, and to engage in publishing generally; to engage in television and radio broadcasting; to engage in other business and graphics industry activities associated with communications, audio-visual media, information systems and services; and also to own and manage real

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estate, and to trade in securities and engage in other investment activities, to read as follows:

 

“The field of business of the company is to publish, either directly or through its subsidiaries or associated companies, daily newspapers and periodicals, and to engage in publishing generally; to engage in other business and graphics industry activities associated with communications, audio-visual media, information systems and services; and also to own and manage real estate, and to trade in securities and engage in other investment activities. The company may also engage in television and radio broadcasting.”

 

2. to authorise the Board of Directors to decide on the sale of the Broadcasting division of the group to Bonnier & Bonnier AB and Proventus  Industries AB or their jointly owned company at an enterprise value of not less than 460 MEUR and otherwise on terms determined by the Board.

 

In addition, the Board proposes that the amendment of the Articles of Association shall not be registered before the Broadcasting division has been sold and that the decision shall become void, if the sale has not been consummated by 30.9.2005.

 

The Board has, subject to insider restrictions, made advance presentations to the largest shareholders for purposes of securing the acceptability of its proposals. Shareholders representing three fourths of all votes and over half of all shares have advised the Board that they support the proposals.

 

The Board of Directors