Times Media has entered into an agreement to acquire a 49% stake in Radio Africa (RAG) in Kenya for R195 million – another step in playing out its broadcast-focused strategy.
RAG is a radio, TV and newspaper business in Kenya, operating three of the top five radio stations in Nairobi, namely Kiss FM, Radio Jambo, and Classic 105.
RAG is one of the top three media groups in the Kenyan market.
Its radio business broadcasts five channels, Kiss FM, Classic 105, Radio Jambo, XFM and EastFM, and these are the core of its business.
RAG’s full year normalised EBITDA for the year ended 30 June 2014 is forecast at R45 million with 3 months of trading remaining in the current financial year which includes sizeable development costs for television and losses for newspapers.
This equates to a purchase price Enterprise Value / EBITDA ratio of 8.0 times for TMG, the group reported.
As rationale for the move, TMG said that the Acquisition represents a “significant opportunity to realise TMG’s strategy of geographical and format diversification as well as harness its existing content and management expertise.”
In the past year TMG has successfully acquired a stake in Ghana’s Multimedia Group Limited and bought controlling interests in two radio stations in South Africa – Rise FM and Vuma FM.
“Radio attracts by far the largest share of advertising spend in the Kenyan market and television is second but with strong growth prospects,” TMG said.
“The business fits well into TMG’s broadcast expansion strategy in South Africa and the continent, and provides a growth opportunity in print not available in SA.”
The group also noted that Kenya has a highly developed mobile market, which will provide “advertising and e-commerce opportunities” for the group.
“Kenya’s Mpesa mobile payment system is the most developed in the world and opens up a market for micro billing that few other countries in Africa have been able to develop,” TMG said.
TMG will add value to RAG at a strategic level, and offer support, capital and guidance in areas such as television content provision and sourcing, digital rollout, newspaper skills transfer and content provision and training for print, television and radio.
The deal is pending some final agreements with shareholders, and is expected to take effect five days after said agreements are in place.