Torchlight Fund LP sells stake in UK's Local World for $45 million

Pyne Gould Corporation ("PGC") today welcomed the sale by its subsidiary, the Torchlight Fund LP ("Torchlight"), of its investment in Local World, a United Kingdom newspaper group, for approximately GBP20 million (NZ$45 million).

Torchlight’s stake is being purchased by Trinity Mirror, which is buying out the 80 percent it does not already own in Local World in a deal which values the entire business at about GDP220m. The transaction may yet require clearance from a UK competition regulator.

Torchlight holds 10.55% of the shares in Local World and will receive around GBP20m (net of transaction costs) of value from the sale proceeds. This will be made up of around GBP13.7m in cash, GBP5m in Trinity Mirror stock issued in a placing at a price of GBP1.58 and a further GBP 1.3m will be held in a cash escrow for two years pending settlement adjustments.

Commenting on the sale, PGC Managing Director George Kerr says:

"This was a very successful investment. Torchlight made over four times its original investment in less than three years from dividends, capital gains and currency movement.

"Torchlight invested approximately GBP7.5m in December 2012, approximately NZD15m at the time. It will receive GBP20m at financial close, or approximately NZD45m at the current exchange rate.

"In addition Torchlight has received GBP8m in dividends from Local World, or approximately NZD17m using the average exchange rate over the period.

"Torchlight purchased its stake in Local World when the UK economy, the UK pound and the newspaper industry were at cyclical lows and out of favour. As expected, all three factors have moved in Torchlight’s favour over the period. These factors, combined with an outstanding performance by Local World’s management team, have created this outcome.

"Torchlight has elected to take part of its consideration in Trinity Mirror shares as it believes the combination of the Trinity Mirror and Local World businesses will deliver further gains going forward."

Mr Kerr, commenting on the accounting impact on PGC, said the sale price reflects a premium of around 11 percent to the unaudited carrying value in Torchlight accounts and reported in PGC’s preliminary 2014-15 result announcement.