Inside the impact bid to save AAP

The impact investing consortium seeking to buy parts of Australian Associated Press, if successful, will look to reduce the amount of stories and photos sent out on the newswire and raise as much as $12 million to fund a purchase and transition the service into a viable business.

According to one version of documents sent to potential investors, obtained by The Australian Financial Review, the consortium has begun sounding out key AAP customers that have indicated support for a new version of AAP over the newswire News Corp Australia, a current shareholder in AAP, is planning to launch in July.

The consortium is seeking to acquire the newswire service, the fact-check unit and photography as the core focus of its bid. It is also open to acquiring the directories service, MediaNet press release service, and analytics business MediaVerse.

It does not want to acquire production and subediting business Pagemasters, the racing and form news or custom editorial divisions. MediaNet has more than 2000 customers and 51 per cent of its revenue comes from annual contracts.

"AAP 2.0" would be run as a not-for-profit business and led by the existing core management team with new appointments made by the consortium.

Nine, AAP's other major shareholder, owns the Financial Review. Sources said packs had been sent out to potential investors over the past few weeks, and there were several versions of a potential acquisition the consortium had worked on.

AAP Newswire, historically a loss-making division, has more than 200 media and corporate subscribers, including the ABC, the Daily Mail, Private Media, Guardian Australia, Australian Community Media and Verizon Media.

"A cost restructure has been planned to reduce the losses of the Newswire business," the consortium documents said. "The MediaNet business is being acquired to support group cash flows."

The consortium's forecasts show it believes it can grow net profit before tax from $1.24 million in 2021 to almost $1.5 million by 2024 to over $2.1 million by 2030. In that time revenue is forecast by the group to go from $21.1 million in 2021 to $26.4 million by 2030.

The impact consortium, which signed former News Corp Australia chief executive Peter Tonagh as its public face last week, is looking to raise between $10 million and $12 million, around $5 million and $6 million in senior unsecured debt. It aims to raise a further $4 million to $5 million via subordinated unsecured debt.

"The impact consortium is seeking to syndicate impact investors who will fund the acquisition through loans and grants, expecting both a social and financial return," the documents state.

Impact investing is investing with the intention of generating a measurable social or environmental good in addition to a financial gain.

Sources said the discussions with interested parties did not guarantee a transaction. The bids were complicated and the consortium, although it would provide funding in a philanthropic sense, would need to be able to realise its investment, and AAP would need to remake its business model to be self-sustainable.

The bid, made up of around 10 investors and philanthropists. also includes Samuel Terry Asset Management managing director Fred Woollard and Australian Impact Investments managing director Kylie Charlton.

If successful in their bid, the new company will also seek grants, including the government's $50 million Public Interest News Gathering Fund, which is focused on regional and community news, and philanthropic grants.

The consortium put in a non-binding indicative bid on April 26 and is planning to put in a final bid on May 31. The AAP board, made up by News Corp and Nine executives, is expected to make a decision about sale or closure soon after. AAP newswire will be closed on June 24 if no buyer is favoured.

However, Seven West Media, which owns 8 per cent, and Antony Catalano's Australian Community Media, 3 per cent, could use the service as subscribers if it continues.

The investor presentation reveals shareholders now contribute roughly 44 per cent of AAP's revenue, a large chunk of which is a member contribution, rather than subscription fee. News Corp and Nine, AAP's largest shareholders with 45 per cent and 44 per cent respectively, have indicated they will not use AAP services once a sale or shutdown is completed. News Corp is looking to launch its own newswire service for its own mastheads by the end of next month.

On March 3, AAP said it would close its doors after 85 years in operation, affecting 180 editorial staff and a total of 500 individual staff members and 100 contractors across its business. AAP had said its newswire service was "no longer viable to continue", and its largest shareholders, News Corp and Nine, decided to withdraw their support for the organisation to which they together contributed more than $10 million a year.

To reduce costs in the newswire business, the consortium would reduce the number of stories produced by the service from 340 a day – around 220 written by AAP staff and 120 curated from international wire services – to 200 stories daily, around 120 local and 80 from around the world.

The new AAP would be focused on breaking news, state and federal politics, courts and justice, and sport. It would no longer cover finance, entertainment or racing. Rather than running a 24/7 service, it would be an 18-hour, six-day-a-week service. The consortium documents reveal the new AAP would have 72 newswire staff and 25 freelancers, compared with the current 147 staff and 25 freelancers.

Newswire images would go down to 80 national photos a day, from 300, and would have 10 staff instead of 28.