Bloomberg News

Austar Tumbles 16% on Concern Murdoch-Backed Bid Will Fail

July 22, 2011

(Updates with closing share prices throughout.)

July 22 (Bloomberg) -- Austar United Communications Ltd., Australia’s second-biggest pay TV network, slumped the most in almost a decade in Sydney trading on concern a bid by Rupert Murdoch-backed Foxtel will be blocked by the antitrust watchdog.

The stock fell 16 percent, the biggest decline since October 2001, to close at A$1.085 in Sydney. Australia’s benchmark S&P/ASX 200 Index climbed 1 percent.

The A$1.9 billion ($2.1 billion), or A$1.52 a share, bid to unite the nation’s two biggest pay-TV operators would “substantially” cut competition, the Australian Competition & Consumer Commission said on its website today. The regulator will seek more information before making a ruling Sept. 8.

“There is a lot of expectation now that this deal won’t go ahead,” said Mark McDonnell, an analyst at BBY Ltd. in Sydney. “While I still think the deal can go ahead, that is not the way the market is thinking about this.”

A failed bid would make Foxtel’s offer the second Murdoch- backed pay-TV deal to collapse this year after News Corp. scrapped a 7.8 billion-pound ($12.7 billion) bid for British Sky Broadcasting Plc this month amid a phone hacking scandal. News Corp. and Consolidated Media Holdings Ltd. each own 25 percent of Foxtel, while Telstra Corp., Australia’s largest phone company, owns the rest.

“Austar will continue to work with the ACCC to resolve issues identified,” the company said in a stock exhange filing. “Austar remains commited to effecting the transaction.”

Australian Division

Sydney-based Austar is controlled by billionaire John Malone and agreed to the cash offer on July 11. News Corp.’s Australian shares fell 1.8 percent to A$15.20, while Telstra closed unchanged at A$3.06.

News Ltd., the Sydney-based Australian division of News Corp., owns 120 metropolitan, regional and rural newspapers, including the Australian, the Daily and Sunday Telegraph. Murdoch, 80, who got his start in 1953 when he inherited a daily newspaper in Adelaide, went on to build a global media empire of newspapers, satellite television and movie studios.

Commission Chairman Graeme Samuel said the regulator is focused on competition concerns in the pay television and telecommunications markets -- not News Corp.’s issues in the U.K., where the hacking scandal prompted Murdoch to shut his News of the World tabloid.

“There is not the slightest scintilla of connection between what happened at the News of the World,” Samuels said in a phone interview today. “We are purely focused on whether there is a substantial lessening of competition.”

Boosting Audience

Foxtel, which focuses on metropolitan areas, bid for Austar to increase its audience by gaining viewers in smaller centers such as Ballarat and Albury.

Foxtel serves 1.63 million households and has about 6 million viewers through retail and wholesale distribution of its services. Austar has 760,000 customers, according to the regulator.

The regulator’s ruling had been due yesterday and the bid may be blocked if the regulator can’t be satisfied on the competition issues, according to Samuels.

Australia, where Murdoch started his media empire, may toughen privacy laws following the hacking scandal with the government to release a paper shortly on whether there should be statutory right to sue for invasion of privacy, Home Affairs and Justice Minister Brendan O’Connor said in an e-mailed statement yesterday.

The government will seek a public discussion on the regulatory change, O’Connor said, arguing any change would need to strike a balance between freedom of expression and the right to privacy.

News Corp. last week said it will review all editorial expenses at its Australian operations over the past three years to check whether payments to contributors and other third parties were for legitimate services.

Bloomberg LP, the parent of Bloomberg News, competes with News Corp. units in providing financial news and information.

--Editors: Garfield Reynolds, Paul Tighe, Young-Sam Cho

To contact the reporter on this story: Robert Fenner in Sydney at rfenner@bloomberg.net

To contact the editor responsible for this story: Vipin Nair at vnair12@bloomberg.net


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