-- Regulator says Seven can't bid for Consolidated Media
-- Decision clears the way for News Corp.'s A$1.94B offer
-- Seven to sell its Consolidated Media shares to News Corp.
(Recasts first paragraph to add implications of the regulator's
decision on News Corp.'s bid for Consolidated Media, background and
details throughout)
By Ross Kelly
SYDNEY--A potential hurdle to News Corp.'s (NWS) 1.94 billion
Australian dollar (US$1.98 billion) takeover bid for cable
television company Consolidated Media Holdings Ltd. (CMJ.AU) was
cleared Thursday when Australia's competition regulator barred
Seven Group Holdings Ltd. (SVW.AU) from making a rival offer.
The decision now opens the way for the global media and
entertainment company to close a deal that will give it
considerable influence over Australia's cable television sector,
where penetration rates remain below more mature U.S. and European
markets.
The opposition by the Australian Competition and Consumer
Commission, or ACCC, to a bid by Seven Group for Consolidated Media
indicates the regulator is uncomfortable allowing deals between
cable television companies and their free-to-air rivals. In
particular, it fears any company gaining excessive power when
bidding for lucrative rights to show major sports events, such as
Australian Rules football games.
Seven Group, controlled by media and mining equipment
billionaire Kerry Stokes, owns around 24% of Consolidated Media and
was pondering whether to outbid News Corp., owner of The Wall
Street Journal.
In June, Seven Group asked the ACCC to assess whether a rival
bid would generate competition concerns and was awaiting the
regulator's final response before making its next move.
In light of the regulator's resistance, Seven Group said
Thursday it has decided to sell its shares in Consolidated Media
into News Corp.'s offer. Tha ACCC has already approved News Corp.'s
bid.
Consolidated Media's controlling shareholder, gaming tycoon
James Packer, had already agreed to sell his 51% holding to News
Corp., meaning News Corp. has all but sown up the deal ahead of a
formal Consolidated Media shareholder vote slated for Oct. 31.
Seven Group is an investor in Seven Network, Australia's most
popular free-to-air television channel, while Consolidated Media
owns 25% of cable company Foxtel and 50% of Fox Sports. As a
result, a merger between the two would give companies associated
with Mr. Stokes substantial interests in Australia's biggest cable
and free-to-air broadcasters.
"The ACCC concluded that the proposed acquisition is likely to
result in a substantial lessening of competition in the market for
free-to-air television services," the regulator said in a
statement.
The ACCC's stance has wider implications for other potential
deals in Australia's media landscape, particularly if companies
with an interest in cable such as Telstra Corp. (TLS.AU) and News
Corp. consider deals with privately held Nine Network or listed
companies Ten Network Holdings Ltd. (TEN.AU), Seven Group and Seven
West Media Ltd. (SWM.AU).
The remaining 50% of Consolidated Media is currently split
equally between News Corp. and Telstra, while News Corp. owns the
remaining 50% of Fox Sports.
The ACCC initially expressed reservations about a Seven Group
bid last month in a preliminary assessment, but has been known to
soften its position in its final ruling on previous occasions.
Original concerns expressed in its preliminary analysis of Foxtel's
bid for regional pay-TV rival Austar were later overturned with
conditions following further consultation with relevant
stakeholders.
Write to Ross Kelly at ross.kelly@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires