Macquarie Media and 81-year-old Bruce Gordon are set to emerge as major shareholders in the Ten Network as the financial-stricken parent, Canwest, bails out to raise much needed cash.
Gordon has an 11.6% stake in Ten, the second largest holding after Canwest, which is in the process of selling off that stake to local institutions.
Sydney boutique investment bank Palladio Partners ran a “beauty parade” overnight of investment banks and brokers to see who could give Canwest the best deal.
This morning everyone was told that Macquarie Group won and has taken the entire stake and will place it.
Macquarie is doing it at close to $1.30 a share (Ten shares closed at $1.365 on Wednesday night on the ASX).
Macquarie has offered to fully underwrite the issue, meaning that it will take any of the unplaced shares, which in turn guarantees that Canwest will maximise its holding and won’t be stuck with a small unsaleable holding. Canwest should receive about $680 million, less fees.
A couple of institutions are tipped to take stakes of about 14.9% each, but the most logical big holder is Macquarie Media, the offshoot of Macquarie Group.
Macquarie Media is the Ten Network’s regional affiliate (through Southern Cross). It, like Gordon, can’t move past 14.9% because of rules restricting the control or reach of media groups in television.
Gordon can’t take control because he controls the WIN TV network, Australia’s biggest regional broadcaster.
The so-called reach rule would prevent him moving past 15% of Ten because it limits any one group to a 75% coverage of the Australian TV market, regional and metro.
There would also be a conflict of interest because WIN is the major Nine affiliate.
By having Macquarie Media as the 14.9% holder, it would mean there’s no chance Gordon getting board representation as Macquarie would be first in line.
A 14.9% stake in Ten would cost Macquarie Media just over $100 million. Macquarie is supposed to have started thinking about “internalising” its management (i.e. getting rid of Macquarie Group).
That will have to wait if it picks up a stake in Ten.
News Corp isn’t buying at the moment, according to sources. It owns 25% of Foxtel, where it has management rights, and has 50% stake in Premier Media, which owns Fox Sports, the most profitable part of the entire Pay-TV business. News is waiting to see what happens to Foxtel and Telstra. If Telstra says no to separation, it will be required to sell Foxtel, which might cost News (and Cons Media, Packer and Stokes), the best part of $1 billion each.
Ten asked for its shares to be suspended until Monday to allow the Canwest stake to be placed.
It also revealed, curiously, that Nick Falloon, the part-time chairman, “had agreed” to vary his employment contract.
Ten Network Holdings Limited (Ten Holdings) today announced that executive chairman Nick Falloon has agreed to vary his employment arrangements.
Under the terms of his existing employment agreement, Mr Falloon was employed for a 12-month period, which expired on 31 August 2009, with the right of either party to terminate on three months’ notice.
Mr Falloon has agreed to vary his arrangements so that Ten Holdings or Mr Falloon must give not less than 12 months’ notice if either party wishes to terminate the employment arrangements on a “without cause” basis. This variance is effective immediately. The existing employment arrangements otherwise remain unaltered.
There was no further explanation. Some in the TV world say the announcement could mean Falloon is involved in the purchase of a stake in Ten. He has been close to Brian Powers, chairman of US buyout group Hellman and Friedman, who used to be chairman of Fairfax.
Several investment banks have pitched the idea of Fairfax buying Ten in the past year, but with the board unstable and split, it won’t do a deal, especially one that would further inflame tensions among shareholders.
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