News Corp trims stake in Phoenix TV by one-third

The block trade attracts good interest and is upsized by more than 30% to $93 million.
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Phoenix TV's Shenzhen headquarters
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<div style="text-align: left;"> Phoenix TV's Shenzhen headquarters </div>

 

News Corp last night sold close to one-third of its holdings in Hong Kong-listed broadcaster Phoenix Satellite Television Holdings through a block trade, raising HK$718.1 million ($93 million).

The seller initially aimed to offload 200 million shares, which implied a deal size between $69 million and $72 million, but a few sizeable long-only orders allowed the deal to be upsized by 32% to 264 million shares.

The block didn’t come with an upsize option at launch, but the initial deal was fully covered in 30 minutes and when the order books closed in Asia after about two hours it was said to be multiple times covered across the price range. News Corp, the Australian media giant controlled by Rupert Murdoch, then took the opportunity to sell more shares.

Hedge funds were drawn to the transaction thanks to a handsome discount at the wide end, while long-only investors saw it as a rare liquidity event in a stock that only trades about $2 million per day, sources said. And when it was clear the deal was turning into a success, additional accounts, including more hedge funds and some high-net-worth retail investors, piled in, driving up the size of the order book even further.

Of course, it did help that the bookrunners had lined up demand for about half the deal before launch. In the end, more than 50 investors came into the transaction. The overall demand was skewed towards hedge funds, but most of the allocation went to long-only investors and, according to sources, it was the presence of the latter that gave the leads the confidence to upsize.

The final deal size of 264 million shares accounted for 5.3% of the company. The shares were offered at a price between HK$2.69 and HK$2.78, which translated into a discount of 6.1% to 9.1% versus yesterday’s close of HK$2.96.

Given the low liquidity in the stock, a 9.1% discount seemed quite reasonable, especially after the share price gained 1.7% yesterday. However, the long-only funds turned out to be pretty price insensitive and the final price was fixed above the bottom of the range at HK$2.72 for a discount of 8.1%.

The share price has come back about 12.4% from this year’s high of HK$3.38 in mid-February, but is still up 17.9% year-to-date.

News Corp, which holds the shares through wholly owned Star Entertainment Holdings, is a long-term shareholder in Phoenix TV and investors didn’t seem worried that it was reducing its stake somewhat.

Earlier this month, the Australian media conglomerate also sold its 44% stake in New Zealand’s leading pay-TV service, Sky Network Television, through a $670 million placement. The two divestments come ahead of a pending split of News Corp’s publishing and entertainment units.

News Corp will still own about 12.1% of Phoenix TV after this transaction [down from 17.4%] and will remain the third largest shareholder after a company controlled by Liu Changle, the founder, chairman and CEO of Phoenix TV, which owns about 37.1%, and China Mobile (Hong Kong), which has a 19.7% stake.

News Corp’s remaining shares will be locked up for three months.

In addition to the other deal dynamics, interest in the deal may also have been fueled by the fact that there aren’t that many media companies listed in Hong Kong and capital markets deals in the sector are quite rare. Phoenix TV also has a good following among retail investors and, as noted, some of them did submit orders as well.

The broadcaster, which provides a broad mix of programmes across its channels, ranging from news and current affairs to drama, entertainment and talk shows, posted a 19.1% increase in revenues in 2012 to HK$4.34 billion and a net profit of HK$833.4 million. In 2011, it made a loss of HK$66.9 million.

The company’s new media operations, which make its programming available on the internet and on a number of mobile networks, helped raise the profile of the group as a television broadcaster during the past year, it said in an earnings report published last week. The revenue of the new media business increased by 24.1% last year, while its outdoor advertising business, which is also relatively new, posted top-line growth of 32.5%.

The block trade was jointly arranged by Bank of America Merrill Lynch and Morgan Stanley.

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