The Hinduja brothers are known for their conservative style. So it comes at a surprise that the Hinduja Group is set to buy Alfacam, the troubled Belgian media company that broadcast the 2012 Olympics.
The two companies had signed a memorandum of understanding in December, saying they were entering exclusive negotiations. And at last week’s World Economic Forum, the brothers confirmed the deal, which has the backing of the Flemish government.
On Friday, trading in Alfacam shares was suspended and the company filed for an extension of its protection under the Continuity of Enterprises Act, which currently allows Alfacam until February 5 to produce a financial restructuring plan.
Sven Marinus, chief executive of Alfacam, explained the logic behind the deal: “The company needs extra capital to reinforce the balance of the group. Secondly, there is an industrial logic in the deal whereby the Hinduja Group includes some media entities and they will develop these after the deal.”
The final structure of the deal is now being decided and it is thought Alfacam’s operations will be expanded internationally after the acquisition.
Marinus told beyondbrics: “There have been in the past projects and investments that left Alfacam very stretched on its investments, especially after 2008 when the financial markets became more difficult and the company suffered. There was big capital exposure and not enough payback capability, so the company got into deeper financial stress.”
He mentions, in particular, an unsuccessful local television channel that was launched in 2007 and sapped the company of cash.
Alfacam reported a consolidated net loss of €13.9m for 2011. Total net cash flow was a negative €1.4m from continued activities and a negative €411,000 from discontinued activities. Total liabilities stood at €94.1m.
The stock has dropped 50.8 per cent in the past year to €1.23, moving against the market where the benchmark Bel-20 index has gained 15.1 per cent to 2,574.76.
Alfacam could clearly do with the investment but the Hinduja brothers have yet to reveal their strategy.
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