News at Ten seems on the way

CanWest entertains bids as media-ownership rules are relaxed

Amid the myriad Australian media deals expected as the restrictions on ownership of local media companies relax today, one that will be watched keenly on both sides of the Pacific will be CanWest Global Communications Corp.'s proposed sale of Network Ten, Australia's third-ranked and most-profitable commercial TV network.

Observers believe a sale — first rejected by CanWest in October when it said it was "reviewing" its options for its stake in the network that targets the 18-49 demo — is possible within weeks. Several U.S. private-equity firms reportedly are running a ruler over Ten's numbers, and a list of local trade buyers headed by Bruce Gordon's WIN Corp. is said to be interested. Bids are due by month's end.

With a market valuation of AUS$4 billion ($3.2 billion) for Ten and its sister company, the Eye Corp. outdoor advertising business, CanWest reportedly is asking as much as AUS$2.7 billion ($2.2 billion) for its 56.4% economic interest. It's an amount analysts said is overpriced given the earnings multiples that the Seven and Nine Network recently were sold for in private-equity deals here and the slump in Ten's first-half earnings because of a weaker ad market (HR 3/29).

Network Ten — whose top-rated programs include "House," a local version of "The Biggest Loser," the talk show "Rove" and "NCIS" — is trading at AUS$3.19 ($2.56) a share. CanWest is believed to be asking AUS$3.50 a share, while buyers are looking to pay about AUS$2.90, sources said. Ten executives declined comment on the sale process.

A sale of Ten also would include its minority shareholders after the company agreed in December to help CanWest find a buyer on the condition that the buyer would acquire the whole company. CanWest is looking to sell its Australian and New Zealand businesses to concentrate on its Canadian media investments.

Included in the investment groups who reportedly are conducting due diligence on Ten are Merrill Lynch Private Equity; the Carlyle Group, which is partnered with independent News and Media in a bid for local newspaper and radio group APN; Blackstone Group Lp.; and Hellmann Friedman.

(Carlyle and Blackstone are part of a consortium that owns Nielsen Business Media, parent company of The Hollywood Reporter.)

But now industry veteran Gordon — a one-time Paramount Television International president whose AUS$1.2 billion WIN Television network is the Nine Network regional affiliate and has the largest reach of any TV network in the country — has emerged as the most likely local trade buyer despite not being one of the early bidders who signed confidentiality agreements in January with CanWest.

With a 14% stake in Ten, Gordon could trump local bidders, including News Corp., newspaper and digital media group Fairfax Media and Macquarie Bank's Macquarie Media Group.

Gordon told media here this week that he might team with one of the private-equity firms, mirroring similar deals made between PBL and CVC Asia Pacific and the Seven Network and KKR last year ahead of the changes to media-ownership rules.

He said that the purchase price he believes CanWest is seeking would be "too great" for WIN to buy Ten on its own. "Obviously, it would be in a partnership situation," Gordon said.

Ownership of the Ten metropolitan stations as well as his regional Nine Network affiliate stations could put WIN on the competition regulators' radar. A Ten acquisition could put WIN in breach of the government's rules where a company controlling commercial TV licenses can have no more than a 75% audience reach.

If CanWest does sell, it is likely to be business as usual in the short to medium term, analysts said.