Guthrie leaves Providence

Although, according to AVCJ sources, Guthrie’s exit was very amicable, this makes two very senior exits from the group’s Hong Kong office since its establishment in January 2007.

"We appreciate Michelle’s contributions to the firm over the last two and a half years, most recently as a senior advisor, and wish her well in her future endeavors,” said Patrick Corso, Managing Director of Providence Equity Asia and co-head of the Hong Kong office. 

Providence’s personnel moves

Before joining Providence in April 2007, Guthrie was previously CEO of Rupert Murdoch’s Asia Pacific satellite TV operation, Star TV, with over 12 years of pay-TV experience. She came on board at Providence’s Hong Kong office soon after its establishment under Andrew Rickards, himself former head of NM Rothschild & Sosn in Asia Pacific and previously co-head of Communications, Media & Entertainment Asia Pacific for Goldman Sachs. Rickards then left the firm in May 2008, around 16 months after his original appointment, apparently to return to his former position at NM Rothschild, with Sean Tong, previously with General Atlantic Partners, coming on board in Hong Kong as MD in September 2008.

The news of Guthrie’s departure did not surprise other private equity professionals, given the relatively light flow of deals from its Hong Kong office. Much of Providence’s deal track record in Asia Pacific is outside the Greater China region, with many of the most significant deals, such as the $428 million 16.4% investment in Aditya Birla Telecom in May 2008, apparently originating from its New Delhi office. That said, the firm does ostensibly enjoy good deal access, with one potential deal – a possible commitment to Indonesian pay-TV player MNC Sky Vision – apparently germinating as the news of Guthrie’s departure breaks.

“We continue to see strong deal flow across the media, communications, education and entertainment industries which are our sectors of focus and expertise,” Corso told AVCJ. “This is driven in large part by rebounding growth in our sectors following the economic crisis, as well as by more realistic valuation expectations of sellers.”

Asia Pacific media mixups

Whatever problems Providence might have had in translating M&A and management experience into private equity investments, the outcomes of some recent private equity media deals suggest that they could have nonetheless dodged a bullet or two. CVC Asia Pacific’s A$4.6 billion ($4 billion) investment into PBL Media in 2006 (topped up to A$5.1 billion or $4.5 billion for 50% in 2007) for instance, done at a peaky 11x EBITDA valuation with a heavy debt load, has turned into a protracted struggle in a crisis-hit market.

Reportedly, CVC AP had to inject further capital in December 2008 to avoid breaching covenants on its debt, and although the business appears in no immediate danger, the investor may face a major dilution when it finally has to refinance its debt in 2013, with one analyst recently awarding the group a discounted cash flow valuation of just A$252 million ($224 million) and bleak prospects for CVC AP to recoup its original investment, despite apparent sustained operational improvement at PBL’s core properties. Markets or strategic buyers may reward CVC AP’s patience later, but the odds appear against a win that is anything like proportionate to the initial expense and subsequent effort.

The CVC AP story, though, is only one instance of the general challenges that media investment faces in Asia Pacific. As media investment professionals maintain, the sector worldwide, and particularly in this region, has regulatory and incumbency hurdles found in few others, with governments and official bodies maintaining FDI limits and other constraints on financial investors in media in many jurisdictions. Added to this are the unique dynamics of a volatile and often uncertain industry, which currently is facing potentially terminal technical challenges in such key areas as magazines and free-to-air broadcasting. Finally, the media sector tends to lag the economic cycle, as advertising revenues rebuild after a downturn, further exacerbating the impact of the current crisis on media investments. Given all these factors, Providence and other media specialists can be given credit for continuing to deliver deals in a multiply tough environment.

“We are therefore generally excited about the investment opportunities available to us across the Asian region,” Corso concluded.

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• Topics
• Media
• People
• Greater China
• Providence Equity Partners
• Patrick Corso
• Michelle L. Guthrie
• CVC Capital Partners