June 20, 2012
Rupert Murdoch's News Corp made a $1.97 billion takeover offer for Consolidated Media Holdings, boosting top shareholder and billionaire James Packer's war chest as he abandons media in favour of casinos.
Mr Packer, who has built stakes in casinos in Australia, London, Macau and Las Vegas, indicated he would accept the offer in the absence of a higher bid for the pay-TV stakeholder, in which he holds 50.1 per cent.
For News, a successful bid would double its stake in pay TV business Foxtel to 50 per cent, and give it 100 per cent of content provider Fox Sports.
‘‘Foxtel is going to dominate sporting coverage in Australia within 10 years, and that’s where News sees the goal,’’ said Morningstar head of equities Peter Warnes.
The offer of $3.50 a share was pitched at a 14 per cent premium to Consolidated Media's closing price on Tuesday of $3.08.
After coming out of a trading halt this morning, CMH shares rose 35 cents, or 11.4 per cent, to $3.43, while News Corp shares inched up 2 cents, or 0.1 per cent, to $20.06.
Filling the war chest
A sale would see Mr Packer exit the last broadcast asset he inherited when his father Kerry died in 2005 as he focuses on his gambling investments.
Mr Packer recently took a 10 per cent stake in Echo Entertainment, owner of Sydney's Star casino, through his Crown amid speculation he wants to use Echo's licence to build a new casino complex in Sydney to attract more Asian high-rollers.
"It frees up more cash and gives him a bit more flexibility," said Paul Xiradis, managing director of Ausbil Dexia, which owns stakes in News Corp and Echo.
"He's shown his hand in Echo ... but his intentions are not well and truly understood," he said.
Mr Xiradis said the moves made sense for News "and the price seems reasonable".
The announcement comes as News Ltd editors prepare to address staff this morning on a dramatic restructure of the News Ltd business in Australia to refocus resources towards their online products, and follows sweeping overhaul announced by Fairfax earlier this week.
News Ltd is also expected to confirm the purchase of specialist business websites Business Spectator and The Eureka Report.
The offer for CMH remains subject to many conditions, most notably approval from the Australian Competition and Consumer Commission. The News Corp board must also approve the deal.
The offer is indicative and there is no guarantee a deal will be done, News said.
Shares in News Corp and Consolidated Media are due to resume trading at 11.00am. Consolidated Media shares closed at $3.08 on Tuesday, while News Corp finished at $20.04.
The planned purchases by News Ltd, as well as the recent moves by mining magnate Gina Rinehart to take a nearly 20 per cent stake in Fairfax showed there was too much concentration in the industry in Australia, said Deakin University journalism professor Martin Hirst.
"It's another step in having only two media companies in Australia and the frightening prospect of one being controlled by Murdoch and one being controlled by Rinehart," he said. "It's Citizen Kane and the mining magnate.
"We're seeing capitalism at its rawest," he said. "The biggest fish eat the smaller fish."
The recent concentration of ownership was "bad" because of the lack of diversity of voices, Professor Hirst said.
BusinessDay, with wires