Finance Photon bids to keep cash ahead of raising James Chessell 395 words 23 June 2010 The Australian
PHOTON Group's new chief executive, Jeremy Philips, is negotiating with some of the 50 firms that make up the marketing services group to take lucrative earn-out payments in stock -- rather than cash -- ahead of an expected $200 million rights issue later this week. It is understood that Mr Philips, the former senior News Corporation executive who joined Photon earlier this month, has met with some success in convincing firms, including London-based media strategy company Naked, to accept their earn-out bonus in stock. Photon shares were suspended shortly after Mr Philips joined the company, which is expected to release details of a widely anticipated profit downgrade and capital raising as soon as tomorrow. Mr Philips is in the midst of a wholesale ``clearing the decks'' exercise including a review of the accounts and a restructure of the business. Photon is also likely to announce 50 redundancies in the troubled parts of the business including its digital unit. This would take the total number of lay-offs to more than 200 since the start of last year. The Australian's website yesterday reported that Photon, which is advised by UBS and Macquarie, could raise as much as $200m through what is likely to be a non-renounceable rights issue. The new stock could be priced as low as 25c a share -- a hefty discount to Photon's last trading price of $1.02. The rights issue would more than match the company's entire market value prior to the suspension of the shares and represents a huge dilution in value for existing shareholders. It is believed Bermudabased Reg Grundy, who owns 24 per cent of Photon, and executive chairman Tim Hughes, who owns about 4 per cent, will take part in the capital raising. It is not clear if Crown executive chairman James Packer, who bought about 4.5 per cent of Photon in April, will participate. The proceeds of the raising are likely to be used to pay down debt and pay for the $50m-plus in earn-out payments owed to key executives. A $195m acquisition spree that finished with the purchase of Naked in February 2008 means several strongly performing firms now have the choice of taking stock or cash. JOHN DURIE
PGA Price at posting:
$18.36 Sentiment: None Disclosure: Held
