Channel Ten creditors back CBS bid to take over network but legal appeal expected
CBS has received the emphatic blessing of creditors in its attempt to take over the Ten Network but the fierce battle with the rival bidder associated with the homegrown media moguls Lachlan Murdoch and Bruce Gordon is far from over.
In the hours before the meeting CBS sweetened its offer to $40m in an attempt to stave off action by disgruntled creditors, particularly 20th Century Fox, owned by Rupert Murdoch’s News Corp. Staff were also strongly in favour of the CBS takeover.
Administrator, Mark Mentha from KordaMentha, said there had been an overwhelming vote from the staff, and also strong support from creditors. The administrators were still to release the vote based on value of debts owed.
“The industry is genuinely excited about a $27bn billion big brother looking after Ten,” he said. But a company associated with Gordon, Birketu, is expected to lodge an appeal in the New South Wales supreme court, challenging a ruling by Justice Ashley Black that cleared the way for today’s meeting to go ahead. Alternatively it may challenge the decision of the administrators in the federal court.
Mentha said he believed it had been a fair and extensive process. Asked if he was surprised by the refusal of the Murdoch- Gordon camp to accept the outcome, he said: “I have been in many contested situations, so nothing surprises me anymore.”
Meanwhile CBS will begin the next steps towards taking over Ten, including resuming the shares of the shareholders in the listed vehicle and seeking the approval of the Foreign Investment Review Board. It is not expected to have an issue with the foreign ownership laws as US companies have previously been given permission to own television assets in Australia, but the decision could take a month.
Staff of Ten and companies owed money by Ten, including its program suppliers, CBS and 20th Century Fox, and the Australian Taxation Office voted overwhelmingly for the offer from CBS, even though the administrators, KordaMentha, outlined the alternative offer to the meeting and told them that one option was to adjourn to further consider the offers.
Staff were overwhelmingly in favour of the CBS offer, because it offers a new owner and many are jaundiced by their experiences of Ten under the management of Lachlan Murdoch, who was acting chief executive and then executive chairman for a substantial period during Ten’s decline.
They also fear job losses under
Murdoch and Gordon as they have proposed moving the network to Sky Television’s office. This is despite written assurances from Murdoch and Gordon as to jobs. Both bids will honour 100% of entitlements.
The biggest loser under the Gordon-Murdoch bid would have been CBS, which would get nothing and would lose its program contracts with a revitalised Ten.
But taxpayers would also be losers under the Murdoch-Gordon proposal. Although the bid offers more money for creditors overall, the tax office and state revenue authorities would get just $700,000 of the nearly $12m they are owed in back taxes. They will get $4.1m from the CBS proposal.
The legal challenge is expected to centre on the fact that KordaMentha allowed CBS to vote on its own proposal at the meeting.
The NSW supreme court yesterday comprehensively rejected the arguments brought by Gordon’s company Birketu, that CBS should not be permitted to vote its entire $348m debt because it constituted a conflict.
Justice Black said such a restriction would discourage creditors, who often had the most to lose in a receivership, from putting forward options to rescue a company.
In an administration there are two voting processes: one based on the number of creditors – and the 700-odd staff form the majority – and votes by value of the debts owed. CBS is owed $348m in program payments and is the largest creditor, followed by the Murdoch-controlled 20th Century Fox, also owed money for programs.