UPDATE 1-Australian regulator blocks Seven bid for Conslidated

Wed Oct 10, 2012 7:50pm EDT

* Regulator wary of Seven's power to buy sports rights

* Competition ruling expected by the market

* Block clears way for News Corp bid, Packer's media exit

* Seven to support News bid after rebuff

MELBOURNE, Oct 11 (Reuters) - Australia's competition regulator blocked Seven Group Holdings from bidding for pay-tv stakeholder Consolidated Media Holdings, clearing the way for Rupert Murdoch's News Corp to go ahead with its $2 billion agreed offer.

Free-to-air television operator Seven, headed by rival media mogul Kerry Stokes, owns almost a quarter of Consolidated Media and wanted the firm for its stake in dominant pay TV-operator Foxtel and content provider Fox Sports.

The Australian regulator said any deal by Seven would make it too strong a bidder for commercial sports rights.

"The proposed acquisition would put Seven Network in a position of advantage over other free-to-air networks in relation to .... the acquisition of sports rights," ACCC Chairman Rod Sims said on Thursday.

It "would significantly reduce the ability of Seven Network's competitors to acquire such content," he added.

Shares in Consolidated last traded at A$3.43, below News Corp's offer of A$3.50 a share. Its high for the year was A$3.46, reflecting expectations the Seven bid would not be allowed.

Seven said on Thursday it would now support the News bid for Consolidated Media, which has already won the support of major shareholder, billionaire James Packer, and compeitition authorities.

The deal would double News' stake in the nation's dominant pay-TV business Foxtel to 50 percent and give it 100 percent of content provider Fox Sports..

The sale of Consolidated to News Corp clears the way for Packer to exit the media business as he expands his interests in gaming.

Packer, who holds a 50.1 percent stake in Consolidated, controls gaming group Crown has already built stakes in casinos in Australia, London, Macau and Las Vegas.

After the ACCC announcement, shares in Crown traded down 0.1 percent at A$9.37, while News Corp fell 0.4 percent to A$24.18 and Seven Group slipped 0.1 percent to A$6.99. The broader market was down 0.5 percent.

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