News Corp and Telstra are inching closer to the public listing of the combined Foxtel entity, after the two parties indicated the merger will be finalised within the next four months.
News Corp and Telstra have signed definitive agreements for the merger of Foxtel and Fox Sports Australia, paving the way for the deal to be finalised by the end of June.
As it currently stands, Rupert Murdoch’s News Corp owns 100% of Fox Sports, and then shares control of Foxtel with Telstra in a 50/50 joint-venture.
Under the merger arrangement News Corp will take a 65% slice of the combined entity, while Telstra will own 35%.
The ultimate aim of the merger has always been to float the entity on the Australian Securities Exchange, and Telstra will likely to sell down its stake to add liquidity to the stock.
“The proposed arrangements will better position the new company for an initial public offering in the future, with News Corp having a majority stake,” the companies said in a joint statement to the market in August.
“If the transaction between Telstra and News Corp is concluded on the proposed terms, News Corp expects to consolidate the new company into its financial statements.”
Patrick Delany will head the new business as CEO, after the Fox Sports boss was given the nod ahead of Foxtel CEO Peter Tonagh in January.
Tonagh has since resigned from the pay TV provider and News Corp entirely.
News Corp will appoint the executive team, and will have four members on the new board (including Murdoch), while Telstra will have two.
“The launch of the combined company will mark the dawn of a new era for our Australian business, and Foxtel and Fox Sports Australia will together be a formidable force,” News Corp chief executive Robert Thomson said.
“We will be able to use our powerful media platforms to promote the unique sports and entertainment assets in the two companies, and improve services for consumers and advertisers.
“Patrick Delany and his talented team will be absolutely focused on serving viewers compelling, contemporary Australian content and superlative sports coverage on personalised platforms.”
Consumer watchdog green-lights merger
The Australian Competition and Consumer Commission (ACCC) had previously reviewed whether the merger would substantially lessen competition, particularly in the acquisition of sporting content, and the supply of triple-play bundles of voice, broadband and audio visual content.
Rival telcos and one Foxtel competitor lodged “powerfully put submissions” with the ACCC.
The review began in October, and by December, after liaising with the aggrieved parties, ACCC chairman Rod Sims decided not to obstruct the merger.
“The ACCC won’t oppose this merger after finding that the commercial incentives of Foxtel, Fox Sports, News, and Telstra will not be substantially altered. Therefore, the change in ownership structure is unlikely to substantially lessen competition,” he said in December.
“An important consideration was that consumers will still be able to access Foxtel’s digital products even if they acquire broadband or mobile services from Telstra’s competitors.
“Also, generally, where triple play [voice, broadband and audio visual] bundles are offered consumers still have to pay to acquire premium packages and there are alternative sources of content for other telecommunications suppliers wanting to offer triple play bundles.”