Sunraysia sticks with PBL Media offer despite higher WIN offer

The directors of Sunraysia Television Ltd have maintained their support for PBL Media Ltd's planned purchase of Channel Nine Perth despite WIN Corp Pty Ltd lodging a higher $146 million offer for the same assets.

Sunraysia's directors said there were legal constraints affecting their ability to recommend the WIN offer, and that negotitions with WIN had failed to resolve these issues.

They also concluded that, even though WIN's offer was $10 million higher than the PBL offer, Sunraysia shareholders would not receive these benefits because of the need to pay a break fee and meet extra tax and legal costs.

A statement from Sunraysia is pasted below:

Update on WIN Offer

On 30 March 2007, Sunraysia announced that it had received a competing offer from WIN in relation to the acquisition of all of the shares in Swan TV for a purchase price of $146,200,000 (WIN Offer).

At the time of receipt of the WIN Offer, Sunraysia had already entered into the Share Purchase Agreement with PBL Media in relation to the sale of Swan TV, under which Sunraysia was contractually bound to sell Swan TV to PBL Media, and the Directors could only change their recommendation that Shareholders vote in favour of Sale to PBL Media if they formed the view that the WIN Offer was a superior proposal to that under the PBL Media Sale.

The WIN Offer as originally received by Sunraysia was not in a form capable of acceptance by Sunraysia, being a letter from WIN under which WIN proposed to acquire Swan TV on terms mutatis mutandis (that is, with only the necessary changes applying) to the signed Share Purchase Agreement with PBL, requesting that Sunraysia sign the letter to accept the WIN Offer. In essence, WIN asked that Sunraysia enter into a binding contract to sell Swan TV to WIN while simultaneously being bound contractually to sell Swan TV to PBL Media. The Directors determined that purporting to accept the WIN Offer would potentially expose Sunraysia to significant liability in the form of a damages claim by PBL Media.

Nevertheless, the Directors continued to explore the feasibility and terms of the WIN Offer by requesting that WIN structure the WIN Offer in a form that would be capable of acceptance by Sunraysia and setting out the necessary changes to the PBL Media Share Purchase Agreement that would be required for such purpose. Despite considerable effort by the Directors to achieve such an outcome, on 11 April 2007 WIN communicated to Sunraysia that it would be prepared to enter into a long-form share sale agreement with Sunraysia and Swan TV only if Ms Presser, on behalf of the Shareholders associated with her, clearly publicly indicated on or prior to signing such an agreement that she and her associated Shareholders intended to participate in the proposed Buy-Back in respect of all or substantially all of their Shares (in the absence of a material change of circumstances).

The Directors expressed to WIN their concerns regarding such a condition to the transaction, as it required the Directors to satisfy a condition that was not within their or Sunraysia's control, as it related to Ms Presser's intentions as a Shareholder. Despite these concerns, on 12 April 2007 WIN confirmed that it would not enter into a share purchase agreement unless this condition was satisfied.

In order to progress the WIN Offer, the other Directors asked Ms Presser whether she (or her associated Shareholders) intended to participate in the Buy-Back and, if so, whether they would publicly indicate that intention. Ms Presser answered that she was not in a position to confirm the extent, if any, of her (or her associated Shareholders') participation in the Buy-Back. As with all other Shareholders, Ms Presser stated that as a Shareholder she will make a decision on her participation in the Buy-Back based on the final information to be provided to all Shareholders with the Buy-Back Booklet, including the class ruling from the Australian Taxation Office when available. Accordingly, the condition imposed by WIN for the entry into an agreement for the sale to it of Swan TV was not capable of being satisfied and the WIN Offer was not capable of being accepted by Sunraysia.

Notwithstanding the inability of Sunraysia to control the acceptance conditionality of the WIN Offer, the Directors have made the following observations in relation to the WIN Offer:

- As well as the acceptance condition regarding Ms Presser's participation in the Buy-Back, there were additional conditions to the proposed WIN Offer agreement compared to the PBL Media Share Purchase Agreement. These included additional warranties relating to the program supply arrangements with Nine Network and to the information provided to PBL Media during the negotiation of the Share Purchase Agreement.

- The condition that was imposed regarding Ms Presser's acceptance of the Buy-Back would have resulted in WIN controlling Sunraysia at a time prior to the expiry of the period within which warranty claims may be brought against Sunraysia, prior to the time of release of the escrowed funds and prior to the time of payment of all Buy-Back instalments. Although WIN has offered to provide for some third party involvement to manage the inherent conflict that WIN would face, the Directors noted the practical difficulties such an arrangement would involve given the potential for these arrangements to be required to be in place for up to 5 years.

- While the WIN Offer purchase price was, on its face, approximately $10 million higher than the purchase price payable under the PBL Media Share Purchase Agreement, the proceeds of the WIN Offer purchase price potentially available for distribution to Shareholders would not equate to an additional $10 million, including without limitation due to:

The Directors' expectation that $1.363 million of the $10 million would be required to fund the break-fee payable to PBL Media under the Share Purchase Agreement due to the Directors ceasing to recommend the Sale to PBL Media be approved by Shareholders;

additional capital gain tax costs and an increase in franking credits; and

additional liabilities, including additional legal fees.

In the circumstances, the directors of Sunraysia continue to recommend the proposed sale of Swan TV to PBL Media (in the absence of a superior proposal) and propose to hold the meeting of shareholders required in order to approve that sale at 10am on Tuesday 24 April 2007. A copy of the Supplementary Statement to the Notice of Meeting to Shareholders which is being sent out to all shareholders today is attached to this announcement.

As detailed in previous announcements, ENT Pty Limited (ENT), a subsidiary of WIN Corporation Pty Ltd (WIN) and a shareholder in Sunraysia, filed documents in the Supreme Court of New South Wales (Court) seeking orders relating to access to certain books of Sunraysia and restraining a meeting of Sunraysia shareholders being held on the basis of the Notice of Meeting dated 27 February 2007, including the meeting convened for 28 March 2007. On 27 March 2007 Austin J ordered Sunraysia to adjourn the Meeting so that it could provide shareholders with additional information relating to the proposed sale of Swan Television & Radio Broadcasters Pty Limited (to supplement that contained in the Notice) and will be at liberty to apply to the Court to hold the adjourned meeting. Sunraysia intends to exercise the liberty to apply granted by Austin J on 27 March 2007 in order to have the proceedings relisted early next week for the purpose of seeking leave to hold the meeting of its shareholders on the basis of the attached Supplementary Statement to the Notice of Meeting to Shareholders.