News Corp wants more Foxtel

More machinations in the media sector

Mike King

Mike King is a Fool.com.au Investment Analyst and Writer. He caught the investing bug more than a decade ago, at a time when the U.S. had invaded Iraq and fear reigned in the markets. His initial success as the markets took off encouraged his passion and thirst for knowledge. With 13 years behind him at one of Australia's largest domestic banks, Mike's passion for stocks led him to join a boutique funds management firm, where he stayed for four years. A seven-year stint in equity research at one of the largest investment banks in the world followed that, giving Mike a thirst to pursue his passion further. Mike holds a Diploma in Applied Finance and Investment and a Graduate Certificate in Financial Planning. His passion is to help retail investors invest better, and that passion was one of his primary reasons for joining The Motley Fool Australia in late 2011. Mike has written thousands of articles since joining, including for Fairfax Media, Yahoo!7, Ninemsn and has also appeared on ABC's The Business. You can see all of Mikes' holdings here

Published June 20, 2012 4:36 pm AEST

News Corp (ASX: NWS) today announced that it has made a $3.50 bid for Consolidated Media Holdings Limited (ASX: CMJ), 50% owned by James Packer. The bid was 42 cents higher than Cons Media's closing price from yesterday of $3.08. Consolidated Media stock has risen 9.7% today, closing at $3.38, still a discount to the offer price.

Mr Packer has said that he supports the bid, considers the offer fair and will support the proposal in the absence of a superior cash offer. It's unlikely that a rival bid will appear.

Cons Media owns 25% of Foxtel, and 50% of the Fox Sports network. If successful, it will mean News Corp will then own 50% of Foxtel with Telstra Limited (ASX: TLS) owning the other 50%, and 100% of Fox Sports.

The deal will require approval from the Australian Competition and Consumer Commission and the Foreign Investment Review Board. I can't foresee any issues with the takeover not proceeding, given Telstra owns 50% of Foxtel already, and Foxtel's original ownership was a 50-50 joint venture between Telstra and News Corp.

Bid for Echo next?

The growing Packer war-chest may mean a bid for Echo Entertainment (ASX: EGP) in the near future through Crown Limited (ASX: CWN), in which James Packer holds a 48% interest. Crown owns 10% of Echo already and has applied for regulatory approval to increase its stake beyond the 10% limit. With cash freed up from the sale of his stake in Cons Media, Mr Packer could then participate in any equity raising that Crown undertakes to finance the purchase of Echo, without diluting his stake in the company. The costs of purchasing Echo will likely be close to or higher than $3bn.

Malaysia's gaming giant Genting may have something to say about a bid for Echo. Genting also currently owns around 10% of Echo, having recently increased its stake. It's not yet known what Genting plans to do with its 10%. It's possible that Genting would be happy to be partners with Crown in Echo Entertainment, or it's possible that the company could make a full bid for Echo.

My view is that Genting and Crown will partner up to take on Echo, with the possibility that Echo will then be split up, with Crown taking the Sydney Casino with Genting getting Echo's three Queensland casinos on the Gold Coast, in Brisbane and Townsville.

Packer's move to gaming

Cons Media is the last of James Packer's media holdings apart from a minor 9% stake in Ten Network Holdings Limited (ASX: TEN). This move has been coming as he increasingly moves away from the media assets he inherited, towards a global casinos and gaming empire.

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Motley Fool contributor Mike King doesn't own shares in any companies mentioned. The Motley Fool's purpose is to help the world invest, better. Take Stock is The Motley Fool's free investing newsletter. Packed with stock ideas and investing advice, it is essential reading for anyone looking to build and grow their wealth in the years ahead. Click here now to request your free subscription, whilst it's still available. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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