Consolidated Media Holders Back News Corp Offer

MELBOURNE--News Corp. (NWS) is set to increase its presence in Australia's subscription-television market after Consolidated Media Holdings Ltd. (CMJ.AU) shareholders approved its 1.94 billion Australian dollar (US$2.01 billion) bid for the company.

The deal will see News Corp., owner of The Wall Street Journal, double its stake in Australian subscription-TV provider Foxtel to 50%, and gain full ownership of sports-channel Fox Sports. Australia's largest telephone company Telstra Corp. (TLS.AU) owns the remaining 50% of Foxtel.

The deal has to go to Australia's Federal Court for approval on Friday, something investors see as a formality, before being completed on November 19.

Foxtel and Fox Sports are to be included, along with News Corp.'s Australian newspaper assets, in the company's publishing arm--which is being split from the entertainment businesses that is to include other broadcasting networks, as well as film and TV production studios.

Foxtel, which last reported A$2.2 billion in annual revenue, will be an important earner for the publishing business at a time when newspaper readership is declining as consumers switch to digital platforms.

Angus Gluskie, managing director of fund manager White Funds Management, which holds News Corp. shares, said he looked forward to Foxtel's inclusion in the publishing business.

"It's important for them (News Corp.) to have a very dominant offering across that media space," he said.

Foxtel is Australia's largest subscription-TV provider and earlier this year bought rival Austar in a deal valued at A$2.5 billion.

Foxtel had 2.3 million households signed up to its service as of June 30 in a country where pay-TV penetration is only 26%, according to Citigroup research--well behind countries like the U.S. and Germany.

News Corp.'s Australian arm, News Ltd., said in a statement Wednesday that it welcomed the vote by Consolidated Media shareholders to support the takeover.

There was little doubt about the outcome given Consolidated Media's two largest shareholders already backed the deal. James Packer's Consolidated Press Holdings Ltd. owns 50.1 of Consolidated Media, while Seven Group Holdings Ltd. (SVW.AU), owned by fellow billionaire Kerry Stokes, has 25%.

The deal follows a A$3.45-a-share bid by News Corp. for Consolidated Media in September, lower than an original non-binding proposal of A$3.50 made in June. Consolidated Media's shares closed at A$3.43 in Sydney on Wednesday, while News Corp. ended up 0.3% at A$23.66.

While Consolidated Press Holdings was an early supporter of the takeover, Seven Group came on board only this month when the Australian Competition & Consumer Commission, or ACCC, rejected its own proposal to take over the whole of the company.

The ACCC said at the time it was concerned about the impact on competition in the free-to-air TV market if Seven Group--which owns 33% of broadcaster Seven West Media Ltd. (SWM.AU)--took over Consolidated Media.

The decision sent a message that the regulator was uneasy about deals that combine pay-TV and free-to-air broadcasting assets.

Write to Gavin Lower at [e-mail]

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