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News Corp. offers $2B for Consolidated Media

by Paul Whitfield | Published June 20, 2012 at 9:59 AM

One of Australia's most famous media rivalries may be about to end after Rupert Murdoch's News Corp. moved to strengthen its hold on Australia's pay-TV market with a A$1.97 billion ($2 billion) offer to buy Consolidated Media Holdings Ltd.

Sydney-based Consolidated Media said Wednesday, June 20, that News Corp. had lodged a A$3.50 per share bid, equivalent to a 14% premium to its Tuesday closing price. A deal would allow News Corp. to increase its 25% stake in Australia's dominant pay -TV network Foxtel Management Pty. Ltd. to 50%, making it an equal partner in the business alongside Telstra Corp. Ltd.

The offer won the backing of Consolidated Media's 50% shareholder, Consolidated Press Holdings, which is controlled by James Packer, Consolidated Media's deputy chairman. "CPH, considering the offer price of A$3.50 per share to be fair, will support the proposal in the absence of a superior cash offer," Packer said in a statement.

The most likely source of a rival offer is Seven Group Holdings Ltd., which owns a 24% stake in Consolidated Media, and which is controlled by a third Australian-born billionaire, Kerry Stokes. Seven Group, which is part-owned by Kohlberg Kravis Roberts & Co. LP, said Wednesday that it "will review the proposal and is considering its options."

Shares in Consolidated Media closed Wednesday at A$3.38, up A$0.30, or 9.8% on their previous close.

The Australian Competition & Consumer Commission has launched an informal review of the acquisition. Submissions to the review will close on July 11 and the ACCC said it expects to make an announcement on the takeover on Aug. 2.

News Corp.'s offer for Consolidated Media comes just over two months after Foxtel won regulatory approval for a A$2.6 billion acquisition of smaller rival Austar United Communications Ltd. That deal united Australia's two major pay-TV operators, giving Foxtel an effective monopoly in the Australian market.

News Corp. turned its attention to the Australian pay-TV market after a year ago abandoning an offer for the remaining 61% of British Sky Broadcasting Group plc amid a political furor over alleged phone-hacking and bribery centered on News Corp.'s now-defunct U.K. Sunday tabloid, The News of the World.

Packer has been diluting his media investments as he shifts his investment focus to casinos.

"My family has a long history in media but I am a pragmatist," Packer was quoted by the Australian Financial Review in an article appearing Wednesday. "This is a good deal for News Ltd. and it is a good deal for Consolidated Media shareholders."

Packer's 48%-owned gambling unit Crown Ltd. recently bought a 10% stake in Echo Entertainment Group Ltd., the owner of Sydney's only gaming license. Packer is thought to be seeking a controlling minority stake in Echo and is lobbying regulators to allow him to increase his holding. It is unclear if Packer is working with or against Genting Bhd, a Malaysian-based gambling company that earlier this month also took a 10% stake in Echo.

The sale of Consolidated Media would reduce the Packer clan's once extensive media investments to about 10% in Australian television company Ten Network Holdings Ltd. It would also effectively end a century-long media industry rivalry, and at times partnership, between the Packer and Murdoch families that helped shape Australia's media landscape.

Consolidated Media reported an operating net profit of A$94.8 million for its fiscal year 2011, up 5.8% year-on-year. It said it received A$65 million from Foxtel, while A$60 million came from its 50% stake in sports-content provider Premier Media Group.

Consolidated Media is taking financial advice from UBS and legal counsel from Ashurst Australia.

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