Freelance journalist Don Groves is a Deadline contributor based in Sydney
UPDATED: News Corp. is poised to strengthen its dominance of the Australian pay-TV industry after launching a $A1.97 billion bid to buy James Packer’s Consolidated Media Holdings. The deal, which Packer has welcomed, would increase News’ holdings in Foxtel, the leading pay-TV platform, from 25% to 50% and give it full ownership of the lucrative sports channels provider Fox Sports. Packer, who owns 50.1% of Consolidated Media, had flagged his intention to unload his media interests to focus on his casino empire which includes Melbourne’s Crown and Perth’s Burswood. Packer could use the $1 billion windfall in his battle to wrest control of Echo Entertainment, which owns Sydney’s Star City Casino. Packer said he welcomes News’ proposal, looks forward to working with News on the detailed terms and conditions, and that he considers the offer price of $3.50 per share as fair. The deal is subject to regulatory approval.
Kerry Stokes’ Seven Group Holdings Limited, which owns the Seven Network and is the second largest shareholder in CMH, said it will review the proposal and consider its options. Foxtel has completed its takeover of the other major TV platform, regional operator Austar, which gives it a total of 2.2 million households, representing around 34% of TV homes. Telco Telstra owns the other 50% of Foxtel. News Corp.’s Australian arm News Limited is poised to announce a restructuring of its Australian newspaper empire which is likely to lead widespread retrenchments. On Monday its major rival Fairfax Media revealed it will lay off 1,900 workers, close two printing presses and downsize its flagship broadsheets in Melbourne and Sydney to tabloids in response to plummeting advertising revenues and a sharp fall in its share price. Mining tycoon Gina Rinehart, the world’s richest woman, has acquired nearly 19% of Fairfax, becoming its largest investor, and is demanding three seats on the board.
CCZ Statton Equities analyst Roger Colman tells Deadline the deal will put Foxtel into “an incredibly powerful position” with a near monopoly in IPTV services which are soon to be introduced. Colman predicts Foxtel will dominate IPTV in the same way that Netflix does in the U.S. He described CMH as the best publicly listed media asset in Australia, nearly twice the size in EBITDA (earnings before interest, taxes, depreciation and amortization) of the second biggest media group, News Limited’s Australian newspapers. He said the offer price was not fair but it recognized that Packer did not have management control of Foxtel or Fox Sports, which are both managed by News.
UPDATE: News Limited chief executive Kim Williams confirmed the CMH offer when he unveiled a restructuring aimed at streamlining operations in management, editorial, advertising sales and marketing across print and digital products. He announced the acquisition of Australian Independent Business Media, the publisher of Business Spectator and the Eureka Report; the creation of a product innovation team; and a $60 million investment in a new publishing platform, Methode, software which allows reporters and editors to create content which is published many times across multiple platforms. Williams said there would be some redundancies in addition to natural attrition but declined to give a number. He said, “Print is not dead and has a strong future in which we have confidence as we build all our future consumer platforms – print, online, tablet, mobile, broadcast and social. The future might be tough but it is exciting and liberating in terms of there never having been more ways to connect with consumers to meet their needs.”
Subscribe to Deadline Breaking News Alerts and keep your inbox happy.