News Corp's Fox Sports Australia, Foxtel to Combine

News Corp CEO Robert Thomson

"It is important that Australia has a strong local platform for its great sports and for homegrown creativity" as "the world of content is becoming more complicated and competitive, says News Corp CEO Robert Thomson.

News Corp and Australian telecom giant Telstra said Thursday that they have agreed to combine the media company's Fox Sports Australia and their pay TV joint venture Foxtel into a new company.

They said the combined entity will be "well positioned to deliver premium sports, as well as homegrown, original and international entertainment in a rapidly evolving and competitive marketplace." The deal comes "at a time when more Australians are consuming premium content across more technologies and platforms than ever before," they said.

The deal, which is still subject to the conclusion of definitive agreements, a regulatory review and the satisfaction of certain other conditions, would see News Corp own a 65 percent stake in the new company, with Telstra holding 35 percent. News Corp would appoint the chairman and a majority of the new company’s board and senior executives. 

"The proposed arrangements will better position the new company for an initial public offering in the future," the companies also said.

"The proposed restructuring of Foxtel and Fox Sports will unlock value for News Corp shareholders and provide a clearer vision into the depth and strength of our Australian assets," said News Corp CEO Robert Thomson. "The new structure will simplify management control and ensure that the company is best placed to leverage the skills of its talented Australian employees and program makers.”

He added: "There is no doubt that the world of content is becoming more complicated and competitive, and it is important that Australia has a strong local platform for its great sports and for homegrown creativity, as well as a showcase for international programs."

Since News Corp will have majority ownership of the new company, it will consolidate its financials. The addition of the new company would boost News Corp's earnings before interest, tax, depreciation and amortization, which for its latest fiscal year amounted to $885 million. Foxtel's latest annual EBITDA came in at $568 million.

Telstra CEO Andy Penn said: "Our strategically significant investment in the new company will be an important part of Telstra’s media strategy. Under this arrangement Telstra will continue to support the company with our broadcast reseller arrangements, which is a major strategic component for us."

He added: "More people are watching more media on more devices for more hours every day of the week, so the demand for media and for content is only going to grow. With a strong premium content proposition and scale subscriber base, the new company will be well positioned to deliver a compelling customer experience."

Telstra and News Corp said they would work to finalize the transaction, including obtaining regulatory approval, in the first half of 2018.

The combined company would invest in "Australian-written, produced and directed programming," delivering "a wider range of new and innovative products and packages across devices and platforms," continue to invest in "premium content and technology to meet growing consumer demand," expand distribution channels for the sale of Foxtel and Fox Sports products, and develop "greater operating efficiencies across the combined businesses," they said.