Australia’s competition watchdog has given local pay-TV provider Foxtel the green-light to acquire regional satellite and cable TV operator Austar for A$2.5bn, after imposing several conditions to limit the merged group’s market dominance.
These…
Australia’s competition watchdog has given local pay-TV provider Foxtel the green-light to acquire regional satellite and cable TV operator Austar for A$2.5bn, after imposing several conditions to limit the merged group’s market dominance.
These conditions include preventing Foxtel from acquiring exclusive IPTV rights to a number of TV and movie channels to help foster increased competition. They will also prevent Foxtel from competing for exclusive mobile rights to certain content.
“By reducing content exclusivity, the undertakings will lower barriers to entry and promote new and effective competition in metropolitan and regional telecommunications and subscription television markets,” explained Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC).
The ACCC’s ruling means the deal has cleared its last major hurdle in a near year-long regulatory tussle, although it is still subject to final Federal Court approval on 13 April.
The deal first hit a snag last July, when the watchdog warned that the proposed transaction risked creating a “near monopoly”.
Foxtel holds a pay-TV monopoly in most Australian cities, while Austar focuses more on rural areas. In addition, Foxtel is 50%-owned by the country’s telecoms incumbent Telstra, with US-based media firm News Corp and Australian investment firm Consolidated Media each owning a 25% stake.
Austar is 54%-owned by US media group Liberty Global, with the remaining 46% being owned by public shareholders.
During the ACCC’s lengthy review, Foxtel was forced to offer concessions to limit its access to exclusive content in order to push through the Austar merger.
Welcoming the watchdog’s approval on 10 April, Foxtel CEO Richard Freudenstein said: “This is a great outcome for consumers because we will now be able to create a company of scale that will deliver innovative new digital products and services, and parity for regional and city customers.
“The new national Foxtel will be one of Australia’s most progressive and dynamic media companies, it will directly employ 2500 people and support a subscription television sector which spends close to A$600m a year on new and original Australian content.”
Foxtel originally announced it’s A$1.52 per share takeover bid in May 2011. The offer includes the assumption of net debt of A$525m, and represents an acquisition multiple of around 10x Austar’s consolidated operating cash flow.
UBS is advising Foxtel. Credit Suisse and Allen & Overy are advising Liberty, while Austar has hired Goldman Sachs and Freehills.
