MCAG-led consortium to acquire BBC Broadcast

27 June 2005

Macquarie Capital Alliance Group (MCAG) today announced that Creative Broadcast Services Limited, a consortium led by MCAG and including Macquarie Bank Limited, has entered into an agreement with the British Broadcasting Corporation (BBC) to acquire 100% of BBC Broadcast Limited (BBC Broadcast) for £166 million (c. A$392 million).

BBC Broadcast is Europe’s leading expert in the distribution and promotion of multimedia content and it offers a comprehensive range of services to playout, publish, promote and provide media access for content across all media, from television to mobile phones. It operates from a state-of-the-art playout facility, the Broadcast Centre, on the BBC Campus at White City in London.

BBC Broadcast’s offering includes:

• playout services, which is a process that transforms content into a datastream ready for transmission;
• access services, including subtitling, sign language and audio description services; and
• creative services, which includes the design and production of promotional trailers and branded content, among other design services.

MCAG will acquire a 65% interest in BBC Broadcast for c. £75 million (c. A$178 million).

The acquisition price represents an historic EV/EBITDA multiple of 11.6 times EBITDA for the year to 31 March 2005, after adjustments for one-off and non-recurring items.

Creative Broadcast Services expects financial close to occur at the end of July 2005, subject to final approval from the UK Secretary of State for Culture, Media & Sport.

BBC Broadcast has an agreement to the 31 December 2015 to exclusively provide the BBC with playout and access services, electronic programme guides and core creative services. In the year to 31 March 2005, the BBC and its related entities represented 91% of BBC Broadcast’s revenues of £109 million. Contracted revenue from the BBC is expected to exceed £500 million over the period to 2015.

Under the acquisition agreement, BBC Broadcast’s well-regarded existing senior management team will be retained.

MCAG’s Chief Executive Officer, Mr Michael Cook, said BBC Broadcast has state-of-the-art facilities and services delivered by very talented people and is in a strong position to take advantage of growing opportunities in Europe as well as developing demand from new communication media.

“Playout operators form an essential link in the delivery of content from owners and creators to end viewers across a broad range of entertainment and information services. As such they are able to deliver stable and predictable revenues over time,” Mr Cook said.

“BBC Broadcast is particularly well-placed in this respect because the management team has extensive experience and strong industry relationships across all aspects of the business. The exclusive supplier contracts with the BBC until at least 2015 underpin a business that is poised for further growth in third party customers.

“BBC Broadcast’s market leading position means it is also ideally positioned to take advantage of expected growth opportunities in the European playout sector.

“In the UK alone, the number of TV channels and content providers have increased significantly in the past five years and is expected to continue, producing latent demand for playout services. At the same time the regulated increase in minimum quotas for subtitling, sign language and audio description for television programming in the UK is expected to drive significant market growth in the access services area over the next few years.”

John Smith, BBC Chief Operating Officer and Executive Board sponsor for the deal, said: “Creative Broadcast Services made the BBC a great offer and showed real capabilities in managing a contractual long-term partnership with a commitment to growing and investing in the business.”

Pam Masters, Managing Director, BBC Broadcast, said: “I am delighted with the BBC’s decision for Creative Broadcast Services to acquire BBC Broadcast. We have built this company from an internal BBC department through incorporation and three successful years of trading under BBC ownership. It is now time for the business to flourish under new ownership with increased investment. We feel confident the decision is right for our business and our staff, and I look forward to working with them to fulfil the potential of this fantastic business.”

Mr Cook said that BBC Broadcast represents the third significant acquisition for MCAG since listing in April 2005.

“MCAG’s broad, global investment focus has resulted in MCAG gaining significant interests in three growing industry sectors, including aged care, and communication and media services,” Mr Cook said.

Acquisition funding and advisors

The acquisition of BBC Broadcast including transaction costs and reserves will be funded through a combination of debt and equity from consortium members.

BNP Paribas has arranged and underwritten debt facilities totalling £110 million.

Macquarie Bank has committed £40 million (c. A$94 million) in equity to the consortium.

MCAG will use a combination of proceeds from its recent initial public offer and recently arranged bridging financing to fund its equity participation in the consortium.

The consortium has been advised by Macquarie Bank Limited who has also arranged debt financing for the consortium. Travers Smith acted as legal adviser to the consortium.

For further information, please contact:

Karen Smith
Corporate Communications Manager
Macquarie Bank
Tel: (44) (0) 20 7065 2420