IN&M profits of €79m on iTouch

INDEPENDENT News & Media has made a €79m profit on its €21m investment in mobile phone information streaming provider iTouch.

For-Side.com, the Japanese provider of ring tones and games for mobile phones, yesterday made a €280m bid for the former IN&M subsidiary iTouch in which the Tony O’Reilly led company retained a 37% stake.

The Japanese bid put a 27% premium on the traded value of iTouch which only became profit-delivering this year, after years of burning cash.

Merrion Stockbrokers’ media analyst Brid White, who rates IN&M shares a buy, said that the deal values IN&M’s stake at €100 million.

“IN&M’s iTouch holding has a book value of c. €21m thus the transaction is expected to result in a positive exceptional of c. €79m or c. 10.5c per share.

On an operating basis, provided the proceeds are used to pay down IN&M debt, the transaction is also accretive.

“Assuming the deal closes by the end of May we estimate that it would reduce trading profit from associates by €750k this year.

However, if the proceeds are set against the company’s debt load - IN&M have said proceeds will be used for ‘general corporate purposes’ - the interest savings for 2005 are estimated to be c. €5m. “This would translate into an increase in our normalised EPS (earnings per share) forecast for 2005 of c. 4% from 16.1c to 16.7c, in 2006 our normalised EPS forecast increases from 18.0c to 18.5c, a 3% increase.

The company’s net debt would also decrease from a current end of 2005 forecast of €1,016m to €916m,” she outlined.

Shares in IN&M, owners of the Irish Independent, last night closed at €2.36, down 1 cent, a 0.43% fall.

For-side has confirmed that it either holds shares, or has received irrevocable undertakings to accept the offer, in respect of approximately 53.5% of the issued share capital of iTouch plc.

IN&M chief executive Tony O’Reilly said he is happy that a small idea, started in South Africa, has worked to the benefit of the whole group in such spectacular fashion.

“This very attractive return on our investment reflects our stated objective of consistently delivering superior returns for our shareholders. The disposal of this non-core asset follows the recent announcement of the group’s expansion into the fast-growing Indian newspaper market and record 2004 results,” he added.

For-side yesterday confirmed that it either holds shares, or has received irrevocable undertakings to accept its offer in respect of approximately 53.5% of the issued share capital of iTouch plc.