NEWSCORP and Telstra are pursuing plans to combine Foxtel and Fox Sports into a sports and entertainment pay-TV giant ahead of a $8 billion stock market float.
While no deal has been finalised yet, the two sides have kicked off talks and sought regulatory approval.
They hope to gain regulatory approval by March 2018, The Australian reports.
Under the terms of the proposed deal, News Corp will have a 65 per cent ownership stake in the new company and the right to appoint the executive management team, chairman and the majority of the board.
Telstra is planning to sell down its 50 per cent stake in Foxtel, and own a 35 per cent holding in the new entity. The telco will have the right to appoint the remaining directors to the new board.
Currently, Foxtel is jointly owned and operated by News Corp, and Telstra. Fox Sports is wholly owned by News Corp, publisher of the Herald Sun.
“The proposed restructuring of Foxtel and Fox Sports will unlock the value for News Corp shareholders and provide a clearer vision into the depth and strength of our Australian assets,” said News Corp chief executive Robert Thomson.
“The new structure will simplify management control and ensure that the company is best placed to leverage the skills of its talented Australian employees and program makers.
“There is no doubt that the world of content is becoming more complicated and competitive, and it is important that Australia has a strong local platform for its great sports and for homegrown creativity, as well as a showcase for international programs.”
Fox Sports is currently wholly owned by News Corp.The transaction is not predicated on the passing of the Turnbull government’s media reform bill, which today reached an impasse.
The move will better position the new company for an IPO, with News Corp having a majority stake. Such a move could see Telstra sell down its stake in the new company via the initial public offering.
A deal would transform Foxtel into a much larger and even more profitable cable, satellite and streaming company, making it more attractive to investors who want to bet on the soaring value of sports rights.
A pumped up pay-TV operator would be in a stronger competition to better compete for sports rights with overseas entrants like ESPN and beIN Sports and telcos.
It would also represent one of News Corp’s biggest strategic moves since the Murdoch family split the company in 2013, with the global entertainment assets going to 21st Century Fox and the publishing assets going to News Corp.
Foxtel is arguably Australia’s largest commercial media operator, with 2.9 million subscribers, annual revenues north of $3bn and an enterprise value in excess of $8bn.
It has shown fortitude to beat off increasing competition by embracing innovation in disruption, with the launch of streaming service Foxtel Now.
Executives believe the merger would put the new company in a stronger financial position to hold its ground against streaming services like Netflix and buy premium sports rights and programming.
Fox Sports holds the largest collection of live sports rights with long deals in place to broadcast the most sought-after competitions including the Australian Football League and National Rugby League.
Revenue is primarily derived from monthly affiliate fees received from Foxtel based on the number of subscribers.
It move comes after a round of consolidation among sports broadcasters around the world.
Foxtel and FoxSports merger: NewsCorp and Telstra plan to combine two into pay-TV giant | Herald Sun