Leading Australian pay-TV operator Foxtel has bid to buy 100% of compatriot satellite and cable TV operator Austar for some A$1.52 per share in cash
The offer values the company at A$2.5bn, including net debt of A$525m as of 31 March, or an enterprise…
Leading Australian pay-TV operator Foxtel has bid to buy 100% of compatriot satellite and cable TV operator Austar for some A$1.52 per share in cash
The offer values the company at A$2.5bn, including net debt of A$525m as of 31 March, or an enterprise value of about 10 times Austar’s consolidated operating cash
flow, 54% owner Liberty Global stated. The other 46% is owned by public shareholders.
The price is higher than the A$1.9bn, or A$1.49 per share, valuation reported in the local media last month. At the time, it was also reported that Foxtel was looking to raise A$1.2bn (US$1.24bn) in loans to fund the deal. The share was trading at A$1.26 before the deal was announced, and A$0.95 before it was speculated in the media.
Foxtel is owned by incumbent Telstra (50%), media giant News Corp (25%) and local investor Consolidated Media (25%).
According to the Sydney Morning Herald, the deal would be financed by Foxtel debt as well as shareholder money. Telstra, for its part, reportedly said it payment would comprise a subordinate note. Consolidated Media reportedly said 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.
Austar’s board, which includes representatives from Liberty Global, has said it approves the valuation is fair and has agreed to work with Foxtel on the deal.
The offer, says Austar, is indicative, non-binding and conditional upon due diligence, financing, negotiation and execution of definitive transaction agreements and final board approvals.
The two groups are very complementary: Austar serves regional areas, while Foxtel is mainly active in cities. According to the Sydney Morning Herald, Austar boasts 764,000 subscribers and A$711m in annual revenue, while Foxtel has over 1.5 million subscribers and A$2bn in revenue.
The Australian Competition and Consumer Commission must approve the bid, which also be subject to the opinion of an independent expert representing minority shareholders in Austar.
Liberty Global is being advised by Allen & Overy, while Austar is advised by Goldman Sachs and Freehills.
Austar and Foxtel already work together via their joint ownership of XYZnetworks, the exclusive owner and/or distributor of twelve key programming channels, according to the Austar website.
For the six months to 31 December 2010, Foxtel posted EBIDTA of A$278m (US$289m), a 17% increase on the first half of the previous financial year. Its revenue was A$1.07bn (US$1.12bn), a 9% increase on the A$989m (US$1.02bn) reported in the previous corresponding year.
