Foxtel tables Austar takeover

Australia's pay-TV industry enters consolidation mode as Foxtel offers to take over Austar in a $2 billion deal.
<div style="text-align: left;">
Foxtel is hoping to crack the outback market through Austar
<div style="text-align: left;"> Foxtel is hoping to crack the outback market through Austar </div>

Foxtel has offered to take over Austar for an equity value of A$1.93 billion ($2.04 billion) in a deal that will consolidate two of Australia’s pay-television operators.

Foxtel has 1.63 million subscriber households on cable and satellite, which it serves through retail and wholesale distribution. It yesterday offered shareholders of Austar, which provides subscription TV in regional and rural Australia, A$1.52 per share to buy the company. If the deal goes through, Foxtel intends to merge Austar into itself through a scheme of arrangement, creating a media company with more than 2,500 full-time equivalent employees and expected annual revenues of more than A$2.8 billion.

The merged entity will “roll out new digital products and services even faster to existing and new customers”, said a Foxtel statement explaining the rationale for the deal. It added that Australian consumers in regional areas would enjoy access to new digital subscription channels as well as new flexible packages and pricing, and would get access to the same quality digital services at the same time as their metropolitan counterparts.

After Foxtel’s approach, Austar’s board yesterday recommended the deal to shareholders, saying that the valuation was “appropriate in the context of a change of control transaction”.

The deal is subject to due diligence and regulatory approvals, of which a key one will be the Australian Competition and Consumer Commission. However, as the regions in which Foxtel and Austar operate are largely complementary, Foxtel chief executive Kim Williams told media in Australia he is confident the proposal will comply with competition laws. Foxtel has a focus on metropolitan areas, while Austar is strong in smaller Australian cities.

Analysts were also generally positive on the deal, commenting favourably on the synergies and the geographical fit between the two companies.

Foxtel is owned 50% by Telstra and the rest of its shares are equally shared between News Corp and Consolidated Media Holdings. It will fund the deal through a combination of bank debt and equity, it told the Australian Securities Exchange. Consolidated Media will also raise new debt to fund the deal.

The size of the deal and the multiple entities involved have created an advisory role for a number of firms. Goldman Sachs and Freehills are advising Austar. Foxtel is being advised by AquAsia, UBS and Allens Arthur Robinson. Credit Suisse is advising Telstra. Banks providing debt financing to Foxtel include ANZ, Commonwealth Bank of Australia, National Australia Bank, Westpac Banking Corp and UBS.

¬ Haymarket Media Limited. All rights reserved.
Share our publication on social media
Share our publication on social media