Billionaires Lachlan Murdoch and Bruce Gordon announced yesterday a bid to take over struggling Network Ten. The two have sought an informal review of a joint bid from the Australian Competition and Consumer Commission (ACCC), which is currently in process. The takeover bid followed two days after Rupert Murdoch joined casino mogul James Packer and a group of shareholders to guarantee a $30 million finance package to support the television network while it is looking for a buyer.
PPB Advisory believes the funds will allow the business to continue to trade, facilitate the sale process, and possibly recapitalise the business. However, the money will only be available until the end of August, and is dependent upon the liberalisation of cross-media ownership laws.
Since going into administration with shares plummeting to just 16 cents in June 2017, Ten was placed in receivership on Monday. The pair plan to refinance Ten’s $250 million debts due in December, but this is not possible until the current media ownership laws undergo potential reform over the next few months. Until these changes are law, both men are prevented from controlling Network Ten. Currently, the existing law prevents Murdoch from taking control of Ten as it would amount to a breach of the two-out-of-three rule contained in the Broadcasting Services Act 1992 (BSA).
Basically, the two-out-of-three rule means media companies cannot own a TV network, radio station and newspaper within the same market. Since Mr Murdoch controls radio and newspaper assets in the markets where Ten is broadcast. Mr Murdoch is co-chairman of News Corp, which owns major newspapers, a 50 per cent stake in Foxtel, and is the owner of the NOVA Entertainment. Similarly, Mr Gordon is restricted by the ‘reach rule’. The rule stops a person from controlling media that reaches more than 75 per cent of the population. Mr Gordon already owns regional broadcaster WIN television.
A spokesperson for the Australian Communications and Media Authority said to The Sydney Morning Herald “any transaction affecting the control of a broadcasting licensee must comply with the relevant rules in the Broadcasting Services Act that apply at the time of the transaction.” As of today, it is estimated the pair each own 7.7 per cent and 15 per cent of Ten, worth about $58 million. If the potential transaction takes place, then the pair will each receive 50 per cent economic and voting interest.
What Happens Next?
ACCC chairman Rod Sims said the ACCC plans to assess the potential effect of the transaction on advertisers and competition within free-to-air television, and between free-to-air television and Foxtel. The watchdog will conduct a review under its merger process guidelines, and hear submissions from interested parties by July 24. It is expected a decision or issues statement may be made by August 24, which is five days before the additional funding expires.
Let us know your thoughts about the joint takeover bid for Network Ten by tagging us at #lawpath or @lawpath.