Ten Network Holdings shares have closed at a near one-month high after the company said it was mulling over the sale of its outdoor advertising business.
The broadcaster said in a statement on Monday that it was considering strategic options for Eye Corp, the outdoor advertising business with operations in Australia, New Zealand, Indonesia, United Kingdom and United States.
Although The Australian Financial Review newspaper reported that an information memorandum had been distributed to potential buyers, Ten cautioned there was “no certainty that the strategic review will result in a transaction or that any transaction will be completed”.
Market players welcomed the news, with Ten climbing 2.44 per cent, or two cents, to 84 cents.
It was Ten’s highest close since February 21, the day before new chief executive James Warburton issued a profit downgrade warning of a sharp decline in earnings and revenue.
Morningstar senior equity analyst Tim Montague-Jones said investors reacted positively to news that Eye Corp might be set adrift as it would simplify the business and allow management to focus on the core television operations.
The sale would generate cashflow to pay down debt.
Despite Monday’s rally, Ten’s share price has backpedalled 41 per cent in the past 12 months as media companies have been hit by weak consumer sentiment and a difficult advertising market.
In February, APN News and Media announced it had sold half of its APN Outdoor advertising business to private equity firm Quadrant for $190 million. The deal required regulatory approval.
In the same month, private equity outfit CHAMP investment completed its takeover of oOh!media.
Eye Corp generated $18.4 million in earnings before interest, tax, depreciation and amortisation (EBITDA) in fiscal 2011, Ten’s full year accounts showed.
This represented about 11 per cent of Ten’s total EBITDA, with the remainder from its free to air television network.
Mr Montague-Jones said Ten had previously talked up the potential cross-selling opportunities Eye Corp offered when meeting with advertisers.
“It is a slightly meaningless part of the organisation in value, but it did offer I guess a potential growth avenue further down the track,” Mr Montague-Jones said.
“It is a bit of a sudden change of story.”
In a trading update issued in February, Ten said Eye Corp’s first half EBITDA was expected to fall to $7 million, from $11 million in the prior corresponding period, while revenue was forecast to decline seven per cent.
Ten said in a separate statement that Jon Marquard had been appointed chief operating officer, replacing Kerry Kingston from late April.
Tony McMaster had been named chief marketing officer in a newly created role. He starts on April 2, Ten said.
