Australia’s competition regulator plans to decide whether local pay-TV operator Foxtel can acquire local satellite and cable TV operator Austar on 30 November.
Foxtel’s planned A$1.9bn takeover of Austar hit a snag in July, when the Australian…
Australia’s competition regulator plans to decide whether local pay-TV operator Foxtel can acquire local satellite and cable TV operator Austar on 30 November.
Foxtel’s planned A$1.9bn takeover of Austar hit a snag in July, when the Australian Competition and Consumer Commission’s (ACCC) warned it could create a “near monopoly”.
The regulator called for further information to address preliminary findings that suggested the deal could substantially lessen competition in a number of markets. According to a timetable published on its website, it received that information from the merger parties on 14 October.
Foxtel is 50% owned by the country’s telecoms incumbent Telstra. US-based media firm News Corp and Australian investment firm Consolidated Media each own 25%.
Austar is 54% owned by US media group Liberty Global, with the remaining 46% being owned by public shareholders.
Foxtel holds a pay-TV monopoly in Australian cities, while Austar focuses more on rural areas. However, ACCC’s preliminary analysis on the merger found it is “likely that industry changes will substantially increase the ability and incentive for Foxtel and Austar to compete with one another outside of their existing distribution regions. The proposed acquisition would prevent any such competition from occurring”.
The regulator also warned that a Foxtel/Austar deal could result in significantly less competition in the national market for TV and several markets concerning the country’s telecoms sector.
Foxtel announced its takeover bid for Austar back in May, representing some A$1.52 per share in cash. At the time, the offer valued the group at A$2.5bn, including net debt of A$525m as of 31 March, or an enterprise value of about ten times Austar’s consolidated operating cash flow.
Unconfirmed reports have suggested that Foxtel is looking to raise A$1.2bn in loans to fund the deal, with ANZ, Commonwealth Bank of Australia (CBA), National Australia Bank and Westpac Banking reportedly providing the facility.
The deal is also expected to be financed with cash from its shareholders. Telstra said its payment would comprise a subordinated note, while Consolidated Media has been quoted saying its share would be paid via a new loan.
Credit Suisse and Allen & Overy are advising Liberty, while Austar has hired Goldman Sachs and Freehills. UBS is advising Foxtel.
