UPDATE: Consolidated Media: Held Talks On Possible Change Of Control

MELBOURNE (Dow Jones)--Consolidated Media Holdings Ltd. (CMJ.AU) said Friday it has held talks about a possible change of control following media reports its largest shareholder, Australian casino mogul James Packer, wanted to sell his 50.1% stake in the company.

"CMH has had very preliminary discussions concerning a possible control proposal. No control proposal or other form of offer has been made to CMH and CMH can give no assurance that a control proposal will be made," the company said in a statement, without saying who it has held talks with.

Market speculation about the possible change of control at Consolidated Media was triggered by reports Thursday that Packer wanted to sell his interest to help fund a merger of his casino company Crown Ltd. (CWN.AU) with rival Australian casino company Echo Entertainment Group Ltd. (EGP.AU).

A spokeswoman for Packer's company, Consolidated Press Holdings, which holds his stake in Consolidated Media, declined to comment Friday.

Consolidated Media said in its statement that it wasn't considering a sale of its 25% interest in dominant Australian pay-television company Foxtel. Telecommunications giant Telstra Corp. (TLS.AU) owns 50% of Foxtel and News Corp. (NWS), which owns Dow Jones & Co., publisher of this newswire and The Wall Street Journal, holds the remaining 25%.

Consolidated Media said it has retained investment bank UBS AG to advise on any proposal.

Mark McDonnell, a media analyst at broker BBY, told Dow Jones Newswires that Packer would be in a "very happy situation" with a number of potential bidders for his stake, such as News Corp., Telstra Corp. and media owner Kerry Stokes, whose Seven Group Holdings Ltd. (SVW.AU), also owns a share of Consolidated Media, potentially bidding up the price.

McDonnell said he wouldn't be surprised if News Corp. wanted to rewind a 1998 deal that saw Consolidated Media buy half of News Corp.'s then 50% share of the broadcaster.

A spokesman for at News Corp.'s Australian arm, News Ltd., said it didn't comment on any mergers and acquisitions.

Analysts at Citi and Macquarie cut their ratings for Consolidated Media to Neutral from Buy and Outperform respectively. Citi said in a note a significant bid premium could be difficult to justify given the company's complex ownership structure while Macquarie said regulatory issues for Telstra and capital constraints for Seven could hamper their ability to bid.

CLSA upgraded its rating for Consolidated Media to Underperform, from Sell, on the increased potential for mergers and acquisitions.

-By Gavin Lower, Dow Jones Newswires; 61-3-9292-2095; [e-mail]