GulfMerger advises on landmark financial restructuring

Al Rai Media Group will continue to manage Al Rai Television as part of a long-term management agreement and will be responsible for all day-to-day decisions.

GulfMerger acted as sole financial adviser to Al Rai Media Group on its financial restructuring and the execution of these two landmark strategic transactions.

Based in Kuwait, Publisher Printing Press is engaged in the marketing and sale of print media titles in Kuwait. The company is also engaged in printing for the media industry. For the nine-months ending September 30, 2008, Publisher Printing Press generated operating earnings of KD6.4m.

With the acquisition of Publisher Printing Press, Al Rai Media Group has moved to integrate key strategic capabilities into its operations, namely printing, marketing, sales, and distribution. These capabilities will support Al Rai Media Group in its growth as it plans to introduce, print and distribute new print titles as well as it seeks to expand across the region. Moreover, the acquisition of Publisher Printing Press will allow Al Rai Media Group to consolidate the full earnings of Publisher Printing Press since January 1, 2008 amounting to KD6.4m for the nine-month period ending September 30, 2008. Yousef Al Jalahma, Vice Chairman of Al Rai Media Group said "clearly this acquisition will result in stronger integration with our print media business as well as bring our company to profitability this year as we consolidate the stable and growing earnings from Publisher Printing Press principally earned from the sale of advertisements and the distribution of media titles."

As part of its reorganization to position itself for growth and profitability, Al Rai Media Group also sold 100% of Al Rai Television WLL, its fully-owned subsidiary currently engaged in free-to-air television broadcasting in the region under the Al Rai TV brand, to Abdulaziz & Jassim Trading. Al Rai Television began broadcasting in 2004 and has been growing in market share in key GCC markets, namely Kuwait and Saudi Arabia. While Al Rai Television has been successfully growing in popularity, the business will continue to require significant investments and additional time to reach profitability. For the nine-months ending September 30, 2008, Al Rai Television generated losses of approximately KD1.7m.

Al Jalahma said "Al Rai Television will continue to bear our valuable brandname and as such will continue to be managed by Al Rai Media Group as part of a long-term management agreement designed to ensure its successful development into a profitable television platform. We are responsible for all day-to-day decisions and business will be unchanged for our customers, suppliers, and employees."

As a result of the acquisition of Publisher Printing Press and the sale of Al Rai Television, Al Rai Media Group now is expected to generate KD5.0m in operating earnings in 2008, and KD17.0m in net earnings as a result of a capital gain on the sale of Al Rai Television. The company plans to apply for a listing on the Kuwait Stock Exchange during 2009. Al Jalahma said "these are earnings without a single fils of unrealized profits. With our strong and stable earnings base and upcoming listing on the Kuwait Stock Exchange, Al Rai Media Group will now have new tools it needs to seek opportunities across the GCC region in terms of strategic partnerships and acquisition opportunities. Our listing on Kuwait Stock Exchange will give us the financial means to implement our ambitious growth plans, whether organic or by way of acquisitions".

Once listed on the Kuwait Stock Exchange, with KD5.0m in earnings, Al Rai Media Group is expected to rank amongst the Top 10 most profitable listed companies in the Services sector. Al Jalahma added "for our shareholders who have continued to show confidence in our vision, this financial restructuring now closes a chapter on years of accumulated losses linked to our lack of integration and television business and opens a new chapter on years of profitable earnings and earnings growth which should deliver healthy returns, particularly as we become listed."

GulfMerger advised Al Rai Media Group on its overall financial reorganization as well as the valuation and deal structuring for both the acquisition of Publisher Printing Press and the sale of Al Rai Television, particularly ensuring that Al Rai Media Group would emerge stronger and more profitable. "Today, as a result of these two deals, Al Rai Media Group ranks as one of the most profitable media companies worldwide even in comparison to some of the largest global media companies such as Dow Jones and the New York Times" added Yann Pavie, CEO and founder of GulfMerger.

Pavie added:

"both deals are landmark transactions, particularly in the media sector. GulfMerger has clearly risen to become the leading advisory firm on M&A deals in Kuwait. We continue to demonstrate clear and unrivalled capabilities to close deals in sectors ranging from financial services, building materials, communications, to Information Technology."

GulfMerger recently advised on the sale of a 51% equity interest in Hilal Cement to Italcementi, one of the world's five largest cement groups. Subsequently to the Hilal Cement deal, GulfMerger advised Italcementi on a number of readymix acquisitions in Kuwait, positioning Hilal Cement as the leading readymix company in the country. More recently, GulfMerger advised Mada Communications on its 100% acquisition of Worldpoint Communications and Kuwait Application Service Provider on the sale of a 65% equity interest to world leader Amadeus IT Group