News Corp nears $2 billion Australia pay-TV deal

MELBOURNE Fri Sep 7, 2012 12:12am EDT

A passer-by stands in front of the News Corporation building in New York June 28, 2012. REUTERS/Keith Bedford

A passer-by stands in front of the News Corporation building in New York June 28, 2012.

Credit: Reuters/Keith Bedford

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MELBOURNE (Reuters) - Consolidated Media Holdings Ltd CMJ.AX agreed to back a revised A$2 billion ($2.06 billion) takeover offer from Rupert Murdoch's News Corp (NWSA.O), in a deal that would give News Corp a greater share of Australia's pay-TV market.

A successful takeover would also clear the way for billionaire James Packer, who holds a 50.1 percent stake in Consolidated Media, to exit his last big media venture as he focuses on gambling.

The deal will double the stake of News Corp's Australian unit in dominant pay-TV operator Foxtel to 50 percent and give it 100 percent of content provider Fox Sports, boosting its pay-TV exposure at the same time as it cuts back print operations.

Consolidated Media (CMH) said its board backed the offer, in the absence of a higher bid.

The binding proposal from News Corp represented an implied multiple of 9.4 times forward earnings, as well as a premium of 15 percent to the average share price over the past three months.

"In my view, this is a great outcome for CMH shareholders and for News and it reflects a fair price," Packer said in a statement.

A sale would see Packer all but exit what was once a media empire, built up over decades by his father Kerry Packer and grandfather Sir Frank Packer, apart from a 10 percent stake in television company Ten Network (TEN.AX).

Packer, who has built stakes in casinos in Australia, London and Macau, owns casino group Crown Ltd (CWN.AX) which is hoping to build a second casino in Sydney.

NO HIGHER BID SEEN

News Corp's Australian unit News Ltd (NWS.AX) had previously offered A$3.50 per CMH share in an indicative proposal on June 20.

The new, binding proposal is A$3.45 per share plus a dividend of A$0.06, for a total of A$3.51 per share.

It was not clear whether the offer would be accepted by CMH's second-largest shareholder, Seven Group Holdings (SVW.AX), which holds a 24 percent stake.

Seven, controlled by billionaire Kerry Stokes, has previously said it was considering its options.

Analysts said a rival bid from Stokes was not likely.

"No one can offer the same kind of cost savings and synergies that News can," said one media analyst, who spoke on condition of anonymity because he was not authorized to talk to the press.

"Do I think Kerry Stokes comes in over the top and bids over A$3.45 for an asset that he gets zero cost and revenue synergies for? I would find it very unlikely," he said.

The News Corp offer has been cleared by the Australian Competition and Consumer Commission, but the competition regulator is due to rule on September 13 on a separate request by Seven Group to make a takeover offer for CMH.

Seven Group chief executive Peter Gammell said last month that Seven would wait for the regulator's decision before deciding whether to accept the News offer, according to a report in the Australian Financial Review.

Seven Group did not return calls seeking comment.

Shares in CMH eased 0.6 percent, while News Ltd (NWS.AX) rose 1.5 percent to A$23.87.

(Editing by Richard Pullin)

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