News Corp. Makes $1.9 Billion Takeover Offer for Australia's Consolidated Media

The move will the company's stake in pay TV giant Foxtel to 50 percent and full ownership of Fox Sports Australia.

SYDNEY -- News Corp.’s Australian arm, News Limited has made a AUS$1.97bn ($1.94 billion) takeover bid for Consolidated Media Holdings (CMH) which would give the Rupert Murdoch-owned business 50 percent of pay TV giant Foxtel and full ownership of sports broadcaster Fox Sports Australia.

CMH is a listed media investment company owned 45 percent by James Packer and 22 percent by Kerry Stokes’ Seven Group Holdings.

The deal is the centerpiece of a wider restructure by News Limited here – further details of which are expected to be announced late Wednesday local time -- that will ultimately change News Ltd’s focus from a newspaper company with TV interests to a TV company with a newspaper division.

Foxtel is currently owned 50 percent by telco Telstra, with CMH and News holding 25 percent each. News has management control of Foxtel.

 The deal will also mark James Packer’s exit from the media business that his father, Kerry founded over fifty years ago.

In a statement to the Australian Stock Exchange Wednesday News confirmed it had made an offer for 100 percent of CMH stock at $3.50 a share.

The News Ltd. offer is subject to approvals from the News Corp. board, the Foreign Investment Review Board and the Australian Competition and Consumer Commission. News will undertake due diligence on an exclusive basis and must be satisfied it will have no post-transaction obligations in respect of certain CMH liabilities, it said in a statement.

Packer, CMH’s executive chairman said that the company “welcomes News’s proposal and looks forward to CMH and News working together to address the detailed terms and conditions." He said the $3.50 offer price was “fair," and that CMH supported the proposal “in the absence of a superior cash offer”.

However Kerry Stokes’ Seven Group Holdings, which opens the Seven television network as well as its CMH stake, said separately it “will review the proposal and is considering its options in relation to today's announcement.”

Packer told local business paper the Australian Financial Review: “My family has a long history in media but I am a pragmatist. This is a good deal for News Ltd. and it is a good deal for Consolidated Media shareholders. I have long admired what [News Ltd. chief executive] Kim Williams has done building businesses. I’m sure he will do a great job if News is successful.

“News Corp around the world has done a great job building a TV business. That is what it is – primarily a TV business,” he added.

News Ltd.'s Williams was CEO of Foxtel for 12 years before taking over the reins from John Hartigan late last year. Richard Freudenstein is Foxtel CEO.

Selling out of CMH leaves Packer free to concentrate on his casino business although he retains smalls take in TV network, Ten alongside Lachlan Murdoch.

The move by news comes just three weeks after Foxtel finalized its $1.2 billion takeover of rural pay TV counterpart Austar Communications, making Foxtel the sole major pay TV provider in Australia. Its currently in around 2.2 million or 33 percent of Australian TV homes.   

Fox Sports is widely considered to be one of the TV sectors most profitable businesses, operating eight pay TV and holding a raft of exclusive sports rights.  

The announcement comes in a week of turmoil in Australian media

News Ltd rival, Fairfax Media earlier this week announced it would cut 1900 jobs, close its two largest printing presses in Sydney and Melbourne and introduce paywalls for the digital versions of all its newspapers in the coming months.

At the same time the worlds richest woman, west Australian mining magnate Gina Rinehart is slowly increasing her stake in Fairfax Media. She now holds over 18 percent and is asking for at least three board seats.

Australian treasurer Wayne Swan yesterday said if Rinehart did not sign the organizations charter of editorial independence, she would be a threat to Australian democracy.