Foxtel snares Austar for $2.5b

Stuart Corner
Monday, 11 July 2011 21:06

IT Industry - Deals

Foxtel is to buy satellite pay TV provider Austar for $1.52 per share in cash, a total of $2.5b and a price that is 54 percent above the Austar share price when rumours of the deal first surfaced in February.

The merger will bring together two of Australia's major subscription TV service providers and create one of Australia's largest media businesses with more than 2,500 employees, anticipated revenue of more than $2.8b and a combined investment in original Australian content of more than $500m per annum, according to Foxtel.

Austar provides subscription television services in regional and rural Australia to more than 750,000 customers. It is also a significant provider of programming in the Australian television market through its 50 percent owned joint venture, XYZnetworks, which owns and/or distributes Nickelodeon, Nick Jr, Discovery Channel, Channel [V], [V]Hits, MAX, Arena, The Lifestyle Channel, Lifestyle Food, LifeStyle You, Country Music Channel and The Weather Channel.

Foxtel said it would raise the money for the deal through a combination of bank debt and shareholder capital contributions in the form of subordinated shareholder notes. It has secured committed debt funding from ANZ, CBA, NAB and Westpac.

The transaction remains subject to regulatory approvals including from the Foreign Investment Review Board and the ACCC, approval by Austar minority shareholders and the court. Austar minority shareholders will meet to vote on the transaction following the clearance of the transaction by the ACCC.

Austar's independent directors have all recommend that Austar minority shareholders accept the offer, in the absence of a superior proposal and subject to an independent expert concluding that it is in their best interests.

The transaction will be complex. Majority (54 percent) shareholder, Liberty Global, wil create a new subsidiary that will acquire all the minority shares through a scheme of arrangement, subject to approval by Austar's minority shareholders. Liberty Global will be loaned the funds for this transaction by a Foxtel entity. Foxtel entities will then acquire all Austar shares from Liberty Global. The entire deal is expected to be completed in December 2011 or early 2012.

The rollout of the NBN will shift competitive advantage in electronically delivered entertainment services from network ownership to content, customer service and brand strength and the idea of a merged Austar/Foxtel (50 percent owned by Telstra) already has Optus worried.

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