Leading pay-TV operator Foxtel has bid to buy 100 per cent of local satellite and cable TV operator Austar for some A$1.52 (US$1.62) per share in cash. The offer values the company at A$2.5bn (US$2.7bn), including net debt of A$525m (US$559m) as of March…
Leading pay-TV operator Foxtel has bid to buy 100 per cent of local satellite and cable TV operator Austar for some A$1.52 (US$1.62) per share in cash. The offer values the company at A$2.5bn (US$2.7bn), including net debt of A$525m (US$559m) as of March 31, or an enterprise value of about 10 times Austar’s consolidated operating cash flow, 54 per cent-owner Liberty Global stated. The other 46 per cent is owned by public shareholders.
The price is higher than the A$1.9bn (US$2bn), or A$1.49 (US$1.59) per share, valuation reported in the local media last month. The share was trading at A$1.26 (US$1.34) before the deal was announced, and A$0.95 (US$1) before it was speculated in the media. Foxtel is owned by incumbent Telstra (50 per cent), media giant News Corp (25 per cent) and local investor Consolidated Media (25 per cent). Liberty Global is being advised by Credit Suisse and Allen & Overy, Austar hired Goldman Sachs and Freehills, while Foxtel chose UBS, according to reports.
It has also been reported that Foxtel is looking to raise A$1.2bn (US$1.24bn) in loans to fund the deal. ANZ, Commonwealth Bank of Australia (CBA), National Australia Bank and Westpac Banking are providing the facility, media reports wrote. In addition, ANZ and CBA are providing a bridge loan. The deal is also expected to be financed with shareholder money. Telstra said its payment would comprise a subordinated note while Consolidated Media was quoted saying its share would be paid via a new loan. If the deal goes through, Liberty Global estimates that it would gain gross proceeds of A$1bn (US$1.1bn) for its 688.5 million shares in Austar.
The offer, says Austar, is indicative, non-binding and conditional upon due diligence, financing, negotiation, execution of definitive transaction agreements and final board approvals. The Australian Competition and Consumer Commission must approve the bid, which will also be subject to the opinion of an independent expert representing minority shareholders in Austar.
Recent reports suggested that the CEO of telco Optus, Paul O’Sullivan, expressed his concern over the Foxtel/Austar deal, saying it would hinder competition for content access. The two groups are very complementary: Austar serves regional areas, while Foxtel is mainly active in cities. Local reports wrote that Austar boasts 764,000 subscribers and A$711m (US$757m) in annual revenue, while Foxtel has mroe than 1.5 million subscribers and A$2bn (US$2.1bn) in revenue.
Austar and Foxtel already work together via their joint ownership of XYZnetworks, the owner and/ or distributor of twelve key programming channels, according to the Austar website. For the six months to December 31 2010, Foxtel posted EBIDTA of A$278m (US$289m), a 17 per cent increase on the first half of the previous financial year. Its revenue was A$1.07bn (US$1.12bn), a nine per cent increase on the A$989m (US$1.02bn) reported in the previous corresponding year.
