|
Murdoch, Packer in Cons Media deal 22/01/2008 By: Niraj Shah & Helen Schuller http://www.egoli.com.au/clientservi...ges/cmj_125.gifConsolidated Media Holdings Limited (CMJ) has received a non-binding indicative proposal for the 100% acquisition of the company. The approach came from a tentative consortium led by Lachlan Murdoch’s private company, Illyria Pty Limited and James Packer led Consolidated Press Holdings Limited (Conspress). The proposal involves Illyria and its equity partners forming a 50/50 joint venture with Conspress to acquire all of the shares in Consolidated Media. Consolidated Media was spun out of Packer controlled Publishing and Broadcasting last November and has a 25% interest in PBL Media, which owns Channel Nine, magazine business ACP and has a 50% interest in ninemsn and other websites. Private equity group CVC acquired the other 75% of PBL Media last year as Mr Packer sold down his media interests to focus on his gambling business. On top of its 25% stake in PBL Media, Consolidated Media also owns a quarter stake in Foxtel, half of Premier Media Group which owns Fox Sports, and 27% of job ads website SEEK Limited (SEK). Packer’s Conspress already holds a 38% stake in Consolidated Media and James Packer is Consolidated Media’s executive deputy chairman, although he has temporarily stepped aside while the offer is discussed. Although Conspress has advised that it has given its support to the proposal, which would increase its holdings in Consolidated Media, the company said it had not yet reached a final agreement with Illyria to the terms of the consortium. The consortium is offering $4.06 per share in cash and 0.1116 of a share in Seek Limited (SEK), which they estimate raises bid's value to $4.80 a share at current market prices. The proposal also includes a facility under which Consolidated Media shareholders can elect to receive a greater proportion of their consideration in cash or Seek shares. However, Consolidated Media advised that the aggregate Seek share consideration would be fixed at 76,968,490 Seek shares and the total of the fixed cash component of the consideration would total $2.8 billion. Shaw Stockbroking head of industrial research, Scott Marshall, said the offer is beneficial for shareholders as it crystallises the value of the company whereas the current market undervalues the business. “From the point of view for the business there is potential for restructure that is not available in the public arena and one could speculate where control of the various assets will end up,” he added. At this stage, the proposal is only indicative and Consolidated Media advised that the offer remains subject to a number of preconditions, including financing and the negotiation of a JV agreement between the bidders. The current credit market environment, financing the deal will be an obvious hurdle, however Mr Marshall said the recent family sale of NewsCorp shares may have provided some funding for Lachlan.. “If the recent sale of News Corp shares provided Lachlan with funds, the relationship with CVC and a bit of debt would make the transaction do-able even in this market,” Mr Marshall said. “Conspress would also be expected to to tip in some cash.” Meanwhile, Conspress has advised that it will seek to agree to the terms of the arrangement with Illyria as soon as practicable. CMH said its board convened yesterday to commence consideration of the proposal, with James Packer, Ashok Jacob and Michael Johnson declaring their interests and stepping aside from the board’s consideration. “Further until the proposal has been fully considered, Mr James Packer has relinquished the Deputy Chairman position,” the company advised. Consolidated Media has also set up a sub-committee of independent directors, including former Toll Holdings chief executive Chris Corrigan and Qantas CEO Geoff Dixon, to look at the deal on behalf of the group's shareholders. Mr Marshall said the transaction shows that James Packer my not be turning his back on media entirely. “Clearly his focus has been casinos and gambling. However, he isn’t selling - he is increasing his stake from 37% to 50% so he isn’t stepping way,” said Mr Marshall. Mr Marshall said the transaction gives Lachlan Murdoch the opportunity to prove himself as a mainstay in the Australian business community. “He has media in his blood and he needs to continue to prove himself in the corporate world. This transition is of the scale that he needs to make to ensure his name remains in the business world,” he said. It is worth noting that News Corp isn't involved in the offer, and Mr Marshall said there is no indication that Foxtel will be sold to News Corp. “There is no indication that Foxtel investment will be sold to News Corp, but it is an interesting prospect down the track especially as the ownership structure and shareholder agreements within the bidding joint venture for Consolidated Media are not known,” he said. Mr Marshall said that the relationship between the two families has always been intriguing. “Both families have always pursued their growth strategies independently, but when there has been an opportunity to work together they seem to have explored these possibilities,” Mr Marshall said. Packer and Murdoch last teamed up when they invested in a mobile phone company called One.Tel Ltd. The pair lost a combined $1 billion after the company filed for bankruptcy in 2001. At 1235 AEDT, shares in Consolidated Media were trading 29c higher at $4.15, while Seek was trading down $1.07 or almost 15% at $6.08. |