Packer family restructures media stakes

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SYDNEY -- After two days of speculation, the Packer family's Publishing and Broadcasting Ltd. on Wednesday announced a restructuring that will see its core media assets transferred to a new company, PBL Media. Included in the transfer will be the market-leading Nine Network, ACP Magazines, Microsoft joint venture ninemsn and motoring Web site carsales.com.au.

PBL will own 50% of the new company in a joint venture with private equity fund CVC Asia Pacific.

The deal, which values PBL Media at AUS$4.5 billion ($3.38 billion), is the first of what analysts say will be many that will recast the Australian media landscape following recent changes to media ownership rules that scrap foreign ownership restrictions on media companies here and allow local companies to own two out of three media in any market.

The government, however, has yet to say when the laws will come into effect.

Under the joint venture with CVC, PBL retains management control of PBL Media and its entities, with PBL CEO John Alexander installed as executive chairman. ACP Magazines chief executive Ian Law becomes CEO of the new company.

PBL Media, however, does not include PBL's stakes in pay TV provider Foxtel, sports broadcaster Fox Sports and online jobs portal Seek -- all high-growth areas for the company. They remain under the PBL umbrella, as does its film exhibition venture with West Australian newspapers, Hoyts Cinemas.

PBL executive chairman James Packer, said in a statement that a clear benefit of the restructure will be the "quarantining of the gaming and media businesses."

"The restructure will provide the capital and flexibility necessary for the company the achieve its ambition to expand its international gaming interests," he added. "For PBL, it releases cash at a time when there is a land grab underway for gaming and entertainment assets around the world."

Flagging further acquisitions for the new entity, John Alexander added that "this transaction enables PBL Media to take advantage of opportunities in the media sector both in Australia and overseas."

PBL will receive AUS$4.54 billion ($3.4 billion) in net cash proceeds under the deal.

To fund the payment to PBL, PBL Media will raise AUS$3.75 billion ($2.8 billion) in debt, while CVC will invest AUS$982 million ($740.7 million) to buy convertible notes in the new company.

Once the new media laws take effect, the notes will convert to 50% of the ordinary shares in PBL Media.

Analysts and fellow media executives lauded the deal Wednesday, saying the new structure frees up capital for PBL to pursue its expanding portfolio of global gaming and casino investments while retaining management control over its media businesses.

Commonwealth Bank securities analyst Craig Shepherd described Packer's decision to separate PBL's media and gaming assets as "smart" and said PBL Media will be a profitable business.

"These are great assets; they generate wonderful cash flows, and they're strong operations," he told ABC Radio. "The addition of new management and new ownership will also create further opportunities to buy other assets that will make the company run even better."

Media buyer Harold Mitchell said the new laws and PBL's deal will force a frenzy of activity in the Australian media sector.

"It could lead to the big getting bigger," Mitchell said.

Indeed, the Seven Network has followed PBL's lead as owner Kerry Stokes on Wednesday bought a 15% "strategic" stake in newspaper publisher West Australia Newspapers.

PBL shares came out of trading halt following the announcement and closed at a record high of AUS$20.59 ($15.53).
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