Cash-rich News could target Sky minorities
A COMMON theme among this year’s mergers and acquisitions target lists is companies in which News Corporation is the largest shareholder.
The theory is that News, once it completes a planned demerger of its television and newspaper businesses this year, will be in the mood to mop up minority stakes through the newly created print business.
It follows News’ A$2 billion takeover of Australian pay-TV company Consolidated Media Holdings in November, when it moved to 100 per cent ownership of Fox Sports Australia and 50 per cent of Foxtel.
News has acted similarly with the likes of ESPN STAR Sports, in Asia, and Fox Pan American Sports.
Locally, that brings REA Group and New Zealand pay-TV provider Sky Network Television into the spotlight.
News owns 61.6 per cent of REA Group, worth about A$1.5b. Its involvement dates back to November 2000, when it invested A$10.75 million for a 44.2 per cent stake.
In theory, it would make sense for News to mop up REA at some point, although the problem may be price. REA shares have risen almost 50 per cent over the past year, so News would have to come up with about A$1.2b to buy the stake, assuming a 30 per cent premium.
News did make a play for REA in 2005, when it offered A$2 a share.
Perhaps Sky is the more likely option. It would be another A$1bplus move for News to buy out the minority shareholders, and Sky’s register became more open in November, when New Zealand’s Todd Corporation sold its 11.1 per cent stake.
Citi’s hedge fund sales team says Sky would boost News’ payTV exposure in the same way ConsMedia took its Foxtel stake from 25 per cent to 50 per cent.
News’ main gain, though, is the demerger. It outlined the separation in a document last month. Deutsche Bank expects the print business to have A$2b in cash and no debt.