Macquarie Bank Group announces intention to acquire RG Capital Radio

03 June 2004

Regional Media Pty Ltd, a member of the Macquarie Bank Group, today announced its intention to acquire all of the shares in RG Capital Radio for $3.00 cash per share under a proposed Scheme of Arrangement.  The transaction values the equity in RG Capital Radio at $173 million. On completion of the acquisition, RG Capital Radio will be the seed asset for a new unlisted regional media fund.

The offer price of $3.00 cash per share represents a premium of 50 per cent to the price RG Capital Radio was floated at less than four years ago, and a premium of $0.10 to RG Capital Radio’s closing price prior to the announcement of this offer. “The offer price of $3.00 cash per share represents full and fair value for the company, and gives all shareholders an opportunity to realise cash for their shares at a fair price, for a stock that has been relatively illiquid,” said Mr Greg Ward, Chief Financial Officer for Macquarie Bank.

The directors of RG Capital Radio unanimously support the proposed scheme. They intend to recommend that shareholders vote in favour of the Scheme in the absence of a superior offer and subject to receiving an opinion from the independent expert retained by RG Capital Radio that the Scheme is in the best interests of all shareholders.

The key terms of the Scheme implementation agreement (including break fee arrangements), which governs the proposal, are summarised in the attached ASX statement from RG Capital Radio. Regional Media Pty Ltd expects that the scheme documents will be sent in mid July and that scheme meetings will be held in mid August. The proposal is subject to a number of conditions including approval by the shareholders of RG Capital Radio.

RG Capital Radio currently operates 36 predominantly music-based radio stations in 20 regional markets in New South Wales, Queensland, Victoria and Tasmania. Macquarie Bank Group does not intend to make any changes to the company’s formats, programming or operational management.

“RG Capital Radio is a premier regional radio network in Australia and is an attractive asset,” said Mr Ward.

Regional Media Pty Ltd plans to make RG Capital Radio the seed asset for a proposed new unlisted investment vehicle, which will have a mandate to invest in other media assets outside major State capitals. The fund intends to seek participation from institutional investors and will provide access to Macquarie Bank Group’s specialist funds management expertise and its media specialists in investment banking.

As part of the acquisition, the Chairman of RG Capital Radio, Mr Tim Hughes, has resigned his position on the Board of RG Capital Radio and has agreed to join the Macquarie Bank Group as Chairman of the fund.  Mr Ward said “Macquarie is delighted to welcome Tim to the Group and we look forward to working with one of the premier media operators in Australia to build the media fund. Tim has  a detailed knowledge and understanding of regional media. Following a successful period in regional television, as Managing Director of Sunshine Television in the early 1990’s,Tim returned to RG Capital and has led the expansion of its radio interests from a stake in one licence on the Gold Coast to a network of 36 stations throughout regional Australia.”

Mr Hughes said ”I have accepted this position because Macquarie Bank has a first class track record of financing, building and expanding businesses across many sectors. In particular, once this transaction is completed I look forward to continuing to build on such a sound foundation. RG Capital Radio has a first class management team headed by Rhys Holleran. RG Capital Radio will provide a platform for the fund and we intend to expand our business to provide an exciting and rewarding environment for our listeners, clients, capital providers and importantly all our staff throughout regional Australia.”

Macquarie believes that the proposed new fund will be able to create value by participating in further consolidation of the regional media sector and by:

• Introducing more efficient and lower cost capital structures to the assets acquired;
• Applying consistently outstanding management across a portfolio of assets;
• Providing a common interface to national advertisers seeking to advertise in regional areas; and
• Creating a vehicle of scale.

“Like our other investments in specialised and infrastructure assets, RG Capital Radio is a financially strong, stable business with reliable cash flows.

“Through its offer for RG Capital Radio, Macquarie Bank is demonstrating a vote of confidence in regional Australian media. Other Macquarie funds already have substantial investments outside Australia’s capital cities and particularly in the regional coastal markets where many of RG Capital Radio’s assets are based.

“We believe we can provide RG Capital Radio with access to a deeper capital base and better support for growth as it pursues additional avenues for growth,” said Mr Ward.

Other Macquarie Bank Group funds invest in assets in the transportation, water, telecommunications, property and energy sectors worldwide. The Macquarie Bank Group manages more than A$63 billion in assets across the globe.

RG Capital Radio has existing net debt of $57 million. Macquarie is evaluating various long term financing options for RG Capital Radio.

Mr Ward said the annualised impact on Macquarie’s profit as a result of consolidating RG Capital Radio, after taking account of depreciation, amortisation and fundings costs, will be marginally positive. Mr Ward stated that the impact on Macquarie’s capital position will be a reduction to the Tier 1 capital ratio of no more than 1.3% and will depend upon any refinancing of the business subsequent to acquisition. He said that it is expected that RG Capital Radio will be transferred into the proposed MBL Media Fund within 12 months, subject to a discussion with investors.

Matthew Russell
Public Relations
Macquarie Bank Limited
Tel: (612) 8232 4102
Mobile: (614) 1069 9532

Jenny Kovacs
Investor Relations
Macquarie Bank Limited
Tel: (612) 8232 3250
Mobile: (614) 1354 6547