The Wall Street Journal-20080122-Media Scions Unite For a Privatization- Lachlan Murdoch- James Packer Push Australian Pact
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Media Scions Unite For a Privatization; Lachlan Murdoch, James Packer Push Australian Pact
SYDNEY -- Lachlan Murdoch and James Packer, two Australian media scions, are joining forces in a A$3.31 billion (US$2.91 billion) deal to privatize Consolidated Media Holdings Ltd.
The deal would see two of the biggest media families in Australia team up to continue the shake-up of local media that has been under way since media-ownership laws were relaxed last year.
The venture would own Consolidated Media's 50% stake in Fox Sports and 25% stakes in the Australian pay-television business Foxtel and PBL Media, which owns ACP magazines and the Nine television network.
Mr. Murdoch is the eldest son of News Corp. Chairman Rupert Murdoch. Mr. Packer is the son of the late Kerry Packer. Lachlan Murdoch's move is independent of News Corp., whose holdings include Fox News Channel and Dow Jones & Co., publisher of The Wall Street Journal.
Consolidated Media said yesterday it had received a nonbinding takeover offer from Lachlan Murdoch's investment company, Illyria Pty. Ltd., and Consolidated Media's major shareholder, Consolidated Press Holdings Ltd.
Consolidated Press, Mr. Packer's investment company, would own half of Consolidated Media under the deal. Illyria and its co-investors, which include San Francisco investment firm SPO Partners & Co., would own the other half. Mr. Packer is executive chairman of Consolidated Press and executive deputy chairman of Consolidated Media.
Mr. Murdoch said he started talks with Consolidated Press in "the last few days."
"James knew I was trying to raise equity," Mr. Murdoch said in an interview. "But until I raised equity, there was no point engaging with [Consolidated Press] and James to see if we could form" a joint venture.
The investors offered A$4.06 (US$3.57) for each Consolidated Media share, plus a variable amount of cash based on the value of Consolidated Media's 27% stake in online recruitment firm Seek Ltd. The proposal implies an offer of A$4.80 a share for Consolidated Media, a 24% premium to its price of A$3.86 a share, based on Friday's closing prices. Trading in Consolidated Media's shares was halted before the Australian market opened yesterday.
Mr. Murdoch said the proposal valued Consolidated Media at about 17 times analysts' average forecast for 2008 earnings before interest, taxes and depreciation.
"It's a huge premium to pay, but we'll pay it because we like the businesses and I think I can add a lot of value," Mr. Murdoch said. He said the premium assumed the parties would expand the business and "absolutely" consider organic and acquisition-based growth. "It's too early to think about specific plans," he said, "but we know our investors are long-term holders, so we're in it for the long term."
Lachlan Murdoch and Mr. Packer together invested in failed mobile- phone group One.Tel, resulting in hundreds of millions of dollars of losses.
The latest deal, which has been declared final and can't be increased, is subject to approval by Consolidated Media's board. The company said a subcommittee of independent board members would consider the proposal and that it has appointed UBS as financial adviser. The deal also is subject to regulatory approval, and funding and final joint-venture agreements, Illyria said.
Mr. Murdoch quit his management role at News Corp. in 2005, though he remains on the board, and set up Illyria. Through Illyria, he has taken a stake in an online movie-rental business and invested in a celebrity-management firm active in India's film industry. When he left News Corp., Mr. Murdoch signed a two-year noncompete clause, which expired last year.
The latest deal, if approved, would mark a short life for Consolidated Media, which was spun off from Mr. Packer's former Publishing & Broadcasting unit when he split the media business from his casino operations late last year.
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Iain McDonald and Bill Lindsay contributed to this article.
