Company Data
| Last traded |
R20.00 |
| Change |
R0.00 |
| % Change |
0.00% |
| Cumulative volume |
360 |
| Market cap |
R2.49bn |
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Johannesburg -
Avusa [JSE:AVU] shares rallied on Tuesday, indicating that investors welcomed the media group's proposed R925m acquisition.
This came after Avusa announced on Monday it had signed a memorandum of understanding, paving the way for the acquisition of Universal Print Group and Hirt & Carter from UHC Communications.
At 16:00 local time, Avusa's shares stood 2.70% firmer at 1 900c on Tuesday.
By contrast, other media stocks were either flat or weaker.
Rob Nagel, portfolio manager at Cadiz Asset Management, described the proposed acquisition as a "very good deal".
Nagel said new business was a good fit for Avusa, which was cyclical. A cyclical business is sensitive to economic changes, falling when the economy slumps and rising when growth picks up.
This new business, he said, would help Avusa go through the downturns much better.
Nagel also said the price looked good on paper.
Avusa will issue 20.55 million new shares to UHC Communications for 2 250c each. After the deal, UHC Communications will own a 16.5% stake in Avusa.
The rest of the deal will be financed by R462.5m in cash.
In terms of the proposed deal, the purchase consideration is based on a forward price to earnings multiple of 7.28 times, determined with reference to the warranted combined net profit after tax for UPG and H&C for the year ending June 30 2011.
"Should UPG and H&C declare audited net profits after tax, the sum of which is less than 90% of the minimum PAT, the purchase consideration shall be reduced by the shortfall multiplied by the ratio that the purchase consideration bears to the minimum PAT," according to the agreement.
- I-Net Bridge