Kerry Stokes may gain an unfair advantage for sports rights if he takes over an Australian pay- television business for which Rupert Murdoch’s News Corp. has offered A$1.94 billion ($2 billion), the regulator said.
Stokes, who controls the country’s most watched free-to-air broadcaster, may gain confidential information from rivals if he buys Consolidated Media Holdings Ltd. (CMJ) and its pay-TV interests, the Australian Competition & Consumer Commission said in a statement on its website. It’s seeking more information before a final ruling on Oct. 11.
The decision squeezes the timetable on News Corp.’s A$3.45- a-share offer for Consolidated, which has already been backed by its 50 percent shareholder James Packer. Stokes’s Seven Group Holdings Ltd. (SVW), which could use its 25.3 percent stake in Consolidated to block the deal, has yet to say whether it’s going to make a counter-bid ahead of a shareholder meeting set for Oct. 31.
“If Stokes is going to do anything with his stake or push his leverage he’ll have to play his hand,” Jason Beddow, chief executive officer of Argo Investments Ltd. (ARG), said by phone from Sydney before the announcement. Argo is Consolidated’s third- largest shareholder with a 0.3 percent stake, according to data compiled by Bloomberg.
Stokes controls Seven West Media Ltd. (SWM), Australia’s most watched free-to-air television broadcaster, through a 33 percent stake held by Seven Group Holdings Ltd. He owns about 67 percent of Seven Group and is chairman of both companies, according to data compiled by Bloomberg.
Buying Consolidated would give Seven Group 25 percent of the Foxtel pay-TV business and 50 percent of Fox Sports Australia, which regularly buys rights to broadcast sports matches alongside free-to-air networks such as Seven West.
A combination of Seven and Consolidated may “create difficulties” for rival networks in their dealings with Fox Sports or Foxtel, the regulator said.
“It could have a significant effect on their businesses by making them less competitive in the acquisition of sporting rights,” the ACCC said.
The regulator has less concern about the impact on non- sports broadcast rights as joint bids are rare, it said.
“We will continue working through the issues with ACCC in an effort to resolve their concerns,” Simon Francis, a Sydney- based spokesman for Seven, said in an e-mail today.
Consolidated shares fell 0.3 percent to A$3.41 at the close of trading in Sydney. Seven Group dropped 0.7 percent to A$7.65.
The ACCC said Aug. 2 that it had no objections to News Corp.’s takeover offer for Consolidated. A successful deal would double News Corp.’s stake in Foxtel to 50 percent and give it full ownership of Fox Sports. Unlike Seven, News Corp. doesn’t own a free-to-air broadcaster in Australia.
Telstra Corp. (TLS), Australia’s largest phone company, holds the other 50 percent of Foxtel, which the ACCC said has a “near- monopoly” on subscription TV in Australia.
The pay-TV businesses would form part of the newspaper and book publishing company which Murdoch is considering separating from News Corp.’s entertainment divisions, said Mark McDonnell, an analyst at BBY Ltd. in Sydney.
Seven Group doesn’t have the financial capacity to make a rival bid and the company will look for benefits such as a deal on television rights in return for giving up its foothold in pay-TV, Royal Bank of Scotland Group Plc. analyst Fraser McLeish said in an Aug. 21 note to clients.
“Seven Group will try to use its position to extract some concessions,” he wrote. Stokes “is unlikely to simply want a higher price. We still see a risk that Seven Group will not be willing to sell.”
Stokes fought one of Australia’s longest-running corporate suits over his claim that the Packer and Murdoch families had colluded to exclude him from the pay-television industry.
The five-year litigation, dismissed by Australia’s Federal Court in 2007, showed Stokes to be “extremely resolute and persistent in pursuit of his and Seven’s business objectives, sometimes to the point of obstinacy,” Judge Ronald Sackville said in his ruling.
Stokes, a friend of Packer, hasn’t yet said what he thinks of the News Corp. (NWSA) bid. There wasn’t a proper offer from News to evaluate, he said at an Aug. 30 event in Newcastle, Australia also attended by Packer.
If Stokes agrees to sell out, News’s takeover offer would release about A$970 million to Packer to help his company Crown Ltd. (CWN) lift its stake in casino operator Echo Entertainment Group Ltd. (EGP)
Crown has applied for permission to buy a further 15 percent of Echo, worth about A$509 million at today’s closing price, in addition to the 10 percent it already owns.
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