One of Nine Entertainment Co's two US hedge fund owners has agreed to retain its entire stake in the company, as the first details of pricing in its upcoming float have emerged.
Media understands that the company will be offered to investors for between $2.05 and $2.30 a share.
Major shareholder and hedge fund Apollo Global Management will surprise investment bankers and other stakeholders when the prospectus is released next week by holding on to its entire stake until at least the second half of next year.
The float is set to take place on or soon after December 9 and will value Nine in the range of $2.4 billion to $2.9bn.
The board has agreed to split shares on a 4-1 basis to reduce the share price to a more manageable number for retail investors. Shares in Nine have been trading at between $8.20 and $9.20 on the grey market and were trading at $8.69 last week. Well-placed sources believe Nine may list at about $2.15 a share with an earnings-multiple valuation of about 8.5 times.
Pricing is key to the success of Nine's float and to the level of interest from potential investors who are wary of media companies with legacy assets.
But it appears Nine will be priced conservatively, albeit on a higher multiple than Kerry Stokes' Seven West Media.
At the close of trade on Friday, Seven West was capitalised at $2.4bn with shares trading at $2.37 each - which means it is valued at about 7.5 times earnings.
Sources said the hedge funds believed there was upside to come for Nine next year because the advertising market was expected to improve on this year. The funds believed it was well placed to exploit an upswing due to its ratings momentum and a strong management team that had agreed to remain in place after the IPO. Their decision would be welcomed by local fund managers, who wanted to see the hedge funds keep "skin in the game" to signal their confidence in the company's future.
One of the last floats of a comparable size on the ASX was the listing of retailer Myer Group in 2009.
Myer's private equity owners TPG and Blum Capital were criticised at the time for not retaining a stake in the company.
The share price plunged on the first day of the IPO.
The hedge funds have seats on the board of Nine, with full access to information about the company and exposure to conditions in the local Australian media sector. When Nine floats on the local market, Apollo will retain 100% of its stake in escrow until Nine posts its first full-year result late next year.
Apollo is led by high-profile American financier Leon Black, who famously paid Sotheby's nearly $120 million for Edvard Munch's painting The Scream.
US hedge fund Oaktree Capital will initiate a partial selldown and may offload about 20% but retain a substantial stake in the TV, digital and entertainment group.
Oaktree was still in discussions about its shareholding last night, ahead of making a decision for the launch of today's sales facility for original investors, which will be open for the next three days.
Apollo and Oaktree own about 54% of Nine, with Apollo holding a 28% stake, and Oaktree the remainder.
With Apollo now emerging as the major shareholder, it will only be able to creep up the share register by buying up to 3% every six months. It may seek to buy more shares in Nine to gain a control premium.
Sources said low-profile UBS managing director Michael Stock had again emerged as a key figure after leading negotiations with Apollo and Oaktree on behalf of Nine.