Destra is Australia’s leading independent digital media company. Its core focus is to acquire content (Intellectual Property), build online Communities and monetise through the sale of content and advertising across internet, subscription TV and in-flight media.
destra Corporation to acquire Magna Pacific Holdings via Scheme of Arrangement
destra Corporation Limited (destra) (ASX:DES) and Magna Pacific Holdings (Magna) (ASX:MPH) today announced their intention to implement a scheme of arrangement (Scheme) under which destra will acquire all of the issued capital in Magna. Destra will grow with this transaction to become the largest non-studio film, video and music content company in Australia and New Zealand.
Destra is Australia’s leading independent digital media company. Its core focus is to acquire content (Intellectual Property), build online Communities and monetise through the sale of content and advertising across internet, subscription TV and in-flight media.
Magna Pacific is the leading independent film and DVD distributor in Australia and New Zealand, with over 1700 titles on DVD. Magna Pacific also owns the full rights to distribute ten feature films for theatrical release in Australia including Becoming Jane (Anne Hathaway) – Joint Venture with the Becker Group, Because I Said So (Diane Keaton, Mandy Moore), and August Rush (Robin Williams & Freddie Highmore).
Proposed Consideration
Under the Scheme, destra will acquire all of the issued ordinary shares in Magna for a consideration per share of:
a) $0.38 cash (Cash Consideration); or
b) 1 fully paid destra ordinary share and $0.15 cash (equivalent to $0.41 based on destra’s last closing price), at the election of each Magna shareholder.
The Cash Consideration values Magna at a:
a) 18.8% premium to Magna’s last closing price of $0.32
b) 18.8% premium to the Lionsgate Australia bid of $0.32
c) 58.3% premium to Magna’s share price one week prior to the Lionsgate offer being announced
The agreement is subject to certain pre-conditions (described below) that must be satisfied before the Scheme is implemented.
Director’s recommendation
The Directors of Magna unanimously recommend that Magna shareholders vote in favour of the Scheme, in the absence of a superior proposal and subject to the Independent Expert concluding that the proposal is in the best interests of Magna shareholders. Subject to those same qualifications, all Magna’s Directors intend to vote all of their shares in favour of the Scheme. 143153
The Board of Magna will appoint an Independent Expert to consider the merger proposal. The Magna Board also reiterate that it has recommended that Magna shareholders reject the current offer by Lionsgate Australia of $0.32 per share.
Strategic Benefits
The agreement provides for destra and Magna to grow through the combined strengths of each other’s operations.
“Destra’s digital music and entertainment content assets are complemented by Magna’s film and DVD distribution rights. Magna’s vast DVD and theatrical library can be leveraged through destra’s existing online and subscription TV distribution network.
In addition, Magna can tap into destra’s online platforms allowing for its content to be distributed via the internet” commented destra CEO, Domenic Carosa.
“It’s a significant opportunity and we will benefit from the incremental earnings, cash flow and scale that Magna will provide, enabling destra to continue to achieve its growth objectives. Furthermore, the transaction is expected to be EPS accretive for destra shareholders in its first year. It is also destra’s intention that current Magna management will continue operating the business,” commented destra Chairman, Carl Olsen.
Magna Pacific Holdings Chairman, Mark Elliott, said, “This agreement consolidates the position of two of Australia’s leading independent entertainment companies. The complementary nature of the two operations allows Magna to realise the full value of its video content, distribution network and management expertise.
“The merged entity will also realise the full benefit of Magna’s state-of-the-art Brisbane site, including its warehouse capacity and production facilities and achieve ongoing operating cost savings in excess of $2 million per annum.”
Key Conditions
Implementation of the scheme is subject to a number of conditions precedent including:
- execution of a Merger Implementation Agreement acceptable to destra and Magna
- Magna shareholder and Court approval of the Scheme
- destra shareholder approval (if required)
- relevant regulatory approvals
- no prescribed occurrences (as defined by section 652C of the Corporations Act)
- no material transactions
- no material adverse change (relating to share and financial markets and Magna business and financial position)
- waiver of termination payments to senior executives as a result of implementation of the Scheme
- exercise or cancellation of outstanding share options
- necessary funding approval