News Corp. (NWSA), the company controlled by Rupert Murdoch, gained regulatory approval to buy Consolidated Media Holdings Ltd. (CMJ) in a A$2 billion ($2.1 billion) deal that may strengthen its hold on pay-television in Australia.
The proposed deal won’t be opposed as it is “unlikely to lead to a substantial lessening of competition” the Australian Competition and Consumer Commission said in a statement today. Consolidated Media’s controlling shareholder, billionaire James Packer, has already signaled his approval of News Corp.’s A$3.50 a share cash offer.
The decision gives News Corp. a head start on Seven Group Holdings Ltd. (SVW), the media and construction equipment group controlled by billionaire Kerry Stokes, which is also seeking regulatory clearance to bid. The ACCC said July 24 it would delay a decision on Seven Group being allowed to make an offer for Consolidated, which owns a 25 percent stake in Australia’s biggest pay-TV business Foxtel.
“If the ACCC ultimately decides that both companies could make this acquisition, then shareholders will be in the happy situation of having two media moguls slugging it out with open checkbooks,” Mark McDonnell, an analyst at BBY Ltd. in Sydney, said by phone before the announcement.
Minority shareholders with 26 percent of the company probably won’t make up their minds until the ACCC has ruled on both offers, McDonnell said.
News Corp. already owns 25 percent of Foxtel while Telstra Corp. (TLS), Australia’s biggest phone company, holds the remaining 50 percent stake.
A successful takeover of Consolidated Media would help give Murdoch more control of his Australian pay-television assets and provide a stream of fast-growing revenues to the publishing arm that he hopes to split off from News’s more profitable entertainment units.
Seven Group controls 24 percent of Consolidated Media and has a 33 percent share in Australia’s biggest free-to-air broadcaster Seven West Media Ltd. (SWM) Seven Group is “considering its options” in relation to the offer, the company said June 20.
Consolidated Media rose 0.3 percent to A$3.44 at the close of Sydney trading, the highest since September 2008.
In addition to its stake in Foxtel, which the ACCC has said holds a “near-monopoly” on Australian pay-TV, Consolidated owns half of Fox Sports Australia.
Taking control of Consolidated Media would give News all of Fox Sports and leave Foxtel a 50-50 joint venture with Telstra.
“News Corp. has no interests in other free-to-air or subscription television entities in Australia,” ACCC Chairman Rod Sims said in the statement. “The ACCC considered that the proposed acquisition was unlikely to materially change News Corp.’s incentives in relation to the supply of content.”
James Packer, with 50 percent of Consolidated Media according to data compiled by Bloomberg, said in a statement June 20 that News Corp.’s proposed price was fair and that he’d support the bid “in the absence of a superior cash offer”.
The A$984 million that Packer would receive from the deal would help him as he jostles for more control of Echo Entertainment Group Ltd. (EGP) alongside companies associated with Malaysian gaming group Genting Bhd. (GENT) Each side has about 10 percent of Echo, which operates Sydney’s only casino, and both are seeking approval from regulators to buy more.
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