APN News & Media has been left rudderless by the resignation of chairman Peter Hunt, chief executive Brett Chenoweth and three other directors, after a clash with major shareholders Independent News & Media (INM) and Allan Gray.
The board and management had proposed a capital raising to reduce APN's debts but the plan was resolutely opposed by INM, which owns about 32 per cent of the company, and fund manager Allan Gray, which owns another 19 per cent.
In a statement late on Monday, APN said preparation for the capital raising, to be underwritten solely by Macquarie Capital, had been under discussion for several months and although the timing and final decision to proceed had not been agreed, at a previous board meeting the non-INM representative directors all unanimously stated their support for Mr Chenoweth and his strategy.
"While the board agreed the company needed to reduce its debt, it was unable to agree on the methodology," the statement said. "The departing directors believed that a capital raising should be undertaken at the time the company announces its full-year results [this Thursday]. This would have been in conjunction with a continued focus on repositioning the publishing businesses and potential asset sales. Other directors believe that consideration of an equity raising should be undertaken in a time frame that allowed other options to be pursued.
"The departing directors have a different view on gearing levels to the major shareholders and in light of their opposing position it is not tenable for them to continue."
The resignation was precipitated after INM, 22 per cent owned by Irish billionaire Denis O'Brien, moved on Friday to hold a general meeting to remove Messrs Hunt and Chenoweth, as well as independent directors Melinda Conrad, John Harvey and John Maasland. If successful, this would have left only independent deputy chairman Ted Harris and INM's representatives Paul Connolly and Vincent Crowley on the board. (Kevin Luscombe was already planning to retire.)
APN - which publishes The New Zealand Herald and various regional papers across Australia, has radio interests including Mix and Classic Hits, and has a growing outdoor advertising business - called a trading halt on Friday. APN shares closed last Thursday at 30¢ a share and have fallen steadily since May 2010 when they peaked at $2.50.
APN, which has a market capitalisation of $199 million, has net debts of $477 million, of which about $400 million matures in 2014-15.
INM, which has a market capitalisation of €17.6 million and had debts of €423 million at June 30, is trying to reduce its borrowings and would struggle to participate in any capital raising by APN.
On Monday, The Irish Times reported INM had agreed to sell its South African operations to philanthropist Iqbal Surve's Sekunjalo for 2 billion South African rand (€169 million).
APN is set to deliver its full-year profit results on Thursday and Citi analyst Justin Diddams wrote that, given the trading update in December, there should be few surprises. UBS expects APN to report a 15 per cent drop in revenue to $936 million and a net profit of $52 million, excluding one-off charges, which was within management's guidance. "While APN appears cheap . . . we see downside risk to earnings [from structural pressures in the print business] and . . . it's too early to call this the bottom," Mr Diddams said.
■ After the market closed on Monday, ad man John Singleton's Macquarie Radio Network, thought to be in talks with APN over a cross-platform publishing deal, reported a 10 per cent drop in first-half revenues to $29.7 million, and a doubling in net profit to $4.5 million.