Foxtel bails out Network Ten

Foxtel has come to the rescue of Australia’s Network Ten, agreeing to buy a 15% stake in the loss-making free-to-air broadcaster.

Ten boss Hamish McLennan

The pay TV giant co-owned by News Corp and telco Telstra will invest A$77m (US$59.5m) in Ten Network Holdings for its stake, the maximum allowed under current cross-media rules.

As part of a multi-faceted deal, Ten gets a two-year option to buy 10% of Presto TV, the streaming service owned by Foxtel and Seven West Media.

The broadcaster is also acquiring 25% of Foxtel’s advertising business Multi Channel Network (MCN), which will take over responsibility for Ten’s sales from September 1. MCN sells airtime for 68 pay TV channels.

The long-mooted Foxtel equity investment is part of a wider share issue by Ten that aims to raise a total of A$154m.

Foxtel is paying 15c a share (a 43% discount on Friday’s closing price of 26c) and the company is making a renounceable entitlement offer to existing Ten shareholders at the same price.

Ten said it will use those funds to reduce debt. Foxtel will get a seat on the Ten board once the deal gets regulatory approval, which could take three months.

Three of Ten’s largest shareholders, Gina Rinehart’s Hancock Prospecting, James Packer’s Consolidated Press Holdings and Lachlan Murdoch’s Illyria, have indicated they will take up their pro-rata entitlements.

It’s not immediately clear whether the biggest investor, Bermuda-based billionaire Bruce Gordon’s WIN Corp, will participate. Earlier this year Gordon blocked a joint bid for Ten from Foxtel and US cable giant Discovery Communications, valued at 23c a share.

The alliance will enable Ten and Foxtel to jointly bid for content including premium sports programing (the two already share programming from 20th Century Fox) and positions Foxtel to increase its stake if the government repeals the cross-media rules.

Ten will start supplying content to Presto TV – which, together with sibling Presto Movies, is competing for subscribers with Netflix and Stan – as soon as the Foxtel investment is approved.

Ten executive chairman and CEO Hamish McLennan said: “Today’s announcement represents an important milestone for Ten and the conclusion of the strategic review process initiated by the board last year.

“We welcome Foxtel’s proposed investment and we are confident this proposal will drive value for all of Ten’s shareholders.

“We think Presto is a terrific platform with lots of potential. While we think SVoD has a way to go in terms of rationalising itself and playing out, we want to use our capital for continuing to fix Ten and that will give a better return to shareholders. If in 18 months or two years we feel it’s a good opportunity for Ten to play in the SVoD space, we’ll do that.”

McLennan stressed Ten’s ratings and revenue performance has materially improved this year, with an 18% increase in total primetime primary channel audience.

Foxtel CEO Richard Freudenstein said: “We believe our proposed investment in Ten is a win-win for Ten and Foxtel. With Foxtel’s local knowledge and expertise, and MCN delivering synergies and improved advertiser access, we are confident this proposal delivers a robust long-term solution for a revitalised, competitive and profitable Ten.”