takeover talk in todays the australian

Backdoor listing for Mitchell

* Simon Canning
* December 20, 2006

AUSTRALIA'S largest and most influential media buying agency, Mitchell & Partners, was officially put into play yesterday when the company launched a backdoor listing through digital media company eMitch.
The deal, which sees eMitch purchase privately owned Mitchell & Partners for $100 million to become the largest listed communications group in Australia, finally brings to an end years of speculation that Harold Mitchell, the most feared media buyer in the country, would sell his company to a multinational.

Under the terms of the deal, eMitch will acquire the media agency as well as offshoots including Stadia Media, brand marketing agency Sparkimpact, Positive Outcomes and direct agency dmitch.

Mr Mitchell, who will become executive chairman of eMitch, said the decision to sell was timely, with the media reforms reshaping the Australian market. He said the deal allowed Mitchell & Partners to remain in Australian hands, but gave the new combined entity the ability to expand into Asia.

Billings for eMitch will grow from $35 million now to more than $900 million with the acquisition.

Mitchell & Partners was founded by Mr Mitchell in 1976. He founded eMitch in 1999 prior to the dotcom crash and after listing at $1 the company limped along with a share price hovering around 5c. However, Mr Mitchell reinvested in the company, allowing it to survive. Over the past year, riding on the back of the surge in internet advertising, the company's billings have grown at more than 200 per cent.

While Mr Mitchell will hold some 40 per cent of shares, observers say it could lay the company open to a takeover - potentially including current shareholders News Limited (publisher of The Australian), the Seven Network and international agency holding companies WPP and Interpublic.

If approved by shareholders in February, the deal will be funded through a combination of debt and equity, with Mr Mitchell planning to use some of his return to lock his investment in eMitch at 40 per cent.

Yesterday eMitch shares benefited from an initial surge, opening at $1.55, rising briefly to $1.75 before closing down 15c at $1.40.